AMaheshwari_BUS540-LH_Module_1_04-04-2011

AMaheshwari_BUS540-LH_Module_1_04-04-2011 - Module 1 Module...

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Module 1 1 Module 1
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Module 1 2 Abstract Response to the first question gives an overview of economic behavior in its four aspects of economic choice, Marginal analysis, Opportunity cost and creativity of individuals. Response to the second question defines individual objectives, indifference curves, opportunities and constraints and individual choice. Response to third question defines Pareto efficiency and one reason that economists use this criterion for comparing economic systems is that it is relatively uncontroversial. Response to the fourth question lists difference between specific knowledge and general knowledge where general knowledge is inexpensive while specific is expensive. .
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Module 1 3 Module 1 Deliverables Assignments: Questions Question: Give an overview of economic behavior in its four aspects and tell which of them is most useful to your work situation. Response: Four aspects of economics behavior are: 1. Economic choice The economic choice model is central in many economic paradigms such as the classical, neoclassical and modern paradigms. The economic choice model in microeconomics combined with the economic notion of utility maximization leads to widely accepted theorems such as revealed utility preferences through prices. The economic choice model is also central in economics in distinguishing between economic factors and non-economic factors. 2. Marginal Analysis “Marginal analysis is the analysis of the relationships between such changes in related economic variables. Important ideas developed in such analysis include marginal cost , marginal revenue, marginal product, marginal rate of substitution, marginal propensity to save, and so on” ( V.V.K. Subburaj, Section Officers, PP 11 ). In microeconomic theory, "marginal" concepts are employed primarily to explicate various forms of "optimizing" behavior. (Consumers are seen as striving to maximize their utility or satisfaction. Firms are seen as striving to maximize their profits.) The maximum value of such a variable is found by identifying a value of the independent variable such that either a marginal increase or a marginal decrease from that value causes the value of the dependent variable being maximized to fall.
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Module 1 4 3. Opportunity Costs The opportunity cost of an action is what you must give up when you make that choice. Another way to say this is: it is the value of the next best opportunity. Opportunity cost is a direct implication of scarcity. People have to choose between different alternatives when deciding how to spend their money and their time. Milton Friedman, who won the Nobel Prize for Economics, is fond of saying "there is no such thing as a free lunch." What that means is that in a world of scarcity, everything has an opportunity cost. There is always a trade-off involved in any decision you make. The concept of opportunity cost is one of the most important ideas in economics. The opportunity cost includes both explicit and implicit costs. Explicit costs are costs that require a
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AMaheshwari_BUS540-LH_Module_1_04-04-2011 - Module 1 Module...

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