Book contents
- Frontmatter
- Contents
- Preface
- How to use this book
- List of online perspectives
- List of further readings online
- List of online video modules
- Book I The market economy, overview and application
- 1 Microeconomics: a way of thinking about business
- 2 Principles of rational behavior in society and business
- 3 Competitive product markets and firm decisions
- 4 Applications of the economic way of thinking: domestic government and management policies
- 5 Applications of the economic way of thinking: international and environmental economics
- Book II Demand and production theory
- Book III Competitive and monopoly market structures
- References
- Index
2 - Principles of rational behavior in society and business
from Book I - The market economy, overview and application
- Frontmatter
- Contents
- Preface
- How to use this book
- List of online perspectives
- List of further readings online
- List of online video modules
- Book I The market economy, overview and application
- 1 Microeconomics: a way of thinking about business
- 2 Principles of rational behavior in society and business
- 3 Competitive product markets and firm decisions
- 4 Applications of the economic way of thinking: domestic government and management policies
- 5 Applications of the economic way of thinking: international and environmental economics
- Book II Demand and production theory
- Book III Competitive and monopoly market structures
- References
- Index
Summary
We are not ready to suspect any person of being defective in selfishness.
Adam SmithThe combined assumptions of maximizing behavior, market equilibrium, and stable preferences, used relentlessly and unflinchingly, form the heart of the economic approach.
Gary S. BeckerMicroeconomics rests on certain assumptions about individual behavior. One is that people are capable of envisioning various ways of improving their position in life. This chapter reviews and extends the discussion begun in chapter 1 of how people – businesspeople included – cope with scarcity, which means choosing among the alternatives for improvement people can envision. According to microeconomic theory, consumers and producers make choices rationally, so as to maximize their own welfare. This seemingly innocuous basic premise about human behavior will allow us to deduce an amazing variety of implications for business and many other areas of human endeavor. The premise undergirds our study of mutually beneficial trades considered in chapter 1 and the forces of supply and demand to be covered in chapter 3. The assumption of rationality is at the core of the economic way of thinking about everything, including managing and thinking itself.
Part A Theory and public policy applications
Rationality: a basis for exploring human behavior
People's wants are expansive and ever expanding. We can never satisfy all our wants because we will always conceive of new ones. The best we can do is to maximize our satisfaction, or utility, in the face of scarcity.
- Type
- Chapter
- Information
- Microeconomics for MBAsThe Economic Way of Thinking for Managers, pp. 41 - 79Publisher: Cambridge University PressPrint publication year: 2010