What is understood under the trade off key concept?
consideration off scarce resources for understanding the decisions of economic agents
What is understood under the incentive concept?
rational self interest: selection of best choice with their information
What is understood under the concept of exchange?
voluntary exchanges are conducted for the benefit of both actors
What is understood under the economic concept of Information?
Actors can have varying degrees of information and foresight, which can influence the decisions.
What is understood under the concept of distribution?
the concept of how the goods are distributed among members of society.
efficiency vs equity:getting most for society from scarce resources vs the most fair distribution
Describe the circular flow model.
What are the basic parts of an economic model?
assumption about the consumer, the firms and the interaction on the market
What are basic assumptions about competitve markets?
all agents are price takers
free entry or exit
homogenous product
perfect information
mobility of the inputs (all needs are covered to produce)
What aspects include the rationality of a consumer?
self-interest
utility maximization
time and budget (…) constraints
What aspects include the rationality of a firm?
revenue, cost and profit
profit maximization
cost constraints
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