Utility

It measures the number of units of Y that must be given up per unit of X added so as to maintain a constant level of utility. MRS = ΔY/ΔX Figure 1. A typical indifference curve The consumer is indifferent between combinations A (4food and 45clothing) and B (6food and 30 clothing). Thus the rate at which the consumer is willing to substitute is MRS = ΔY/ΔX

Explain what is implied by the assumption that decision-makers are rational? How is the assumption of rationality used in the economic analysis of individual behaviour? In many academic disciplines much is spoken about rationality and rational choices. Economists generally refer to 'rational' choices and that individuals in economic theory are rational. By rational we mean people choose options which they perceive to be the best, given the circumstances they are in. In terms of making

Free to Disagree A primary objective of identifying common ground between Nietzsche and Mill’s ideas of freedom is to define freedom adequately so that it can be used as a basis for comparison. Each theorist’s opinion on what freedom is, however, appears to be fairly distinct. Mill might describe freedom as the absence of constraints to original, individual thought, whereas Nietzsche conceptualizes freedom as continual self-overcoming to evolve a more actualized self. Freedom for Nietzsche is overcoming

finance, and experimental economics etc. As they can be seen on the table six behavioral economics models will be mentioned in that paper. According to this, behavioral economics models are separated two different categories which are generalized utility functions and new methods of game-theoretic analysis. In addition, they also class in themselves three different types separately. After that their standard assumptions are showed at the end of the

Econ3101 - Section 006 Intermediate Microeconomics Xavier Vinyals-Mirabent Due: Wednesday, February 1st, 2012. Solutions to Homework 1. 1 1. A consumer has preferences for two goods. Her preferences satisfy Axioms 1 through 4 as discussed in class. A v D v 10 E v 5 C v B v 0 0 5 (a) Plot and label the following bundles: A (2,10) B (6,2) C (0,4) D (8,10) E (4,6) (b) Assume A is indifferent to B (A ∼ B). On a single line, list all the bundles in descending order of preference

Introduction Decision analysis provides powerful techniques to structure complex problems, identify optimal choices, and facilitate communication between the decision analyzer and the person makes the decision. One of the most important values of these techniques is that they enable decision making to be rational rather than intuitive or holistic. They provide a framework for rational decision making in an uncertain environment. As modern decision analysis has been studied for more than five decades

What are the two business paradigms? Within the business disciplines, we are fortunate to have two major paradigms (schools of thought): rationalist and behavioralist. An ideological/theoretical conflict has existed between the two paradigms for over 50 years. Is human decision behavior more consistent with the rationalist models or behavioralist models? Behavioral finance has grown out of this conflict and will likely result in the resolution of the conflict as time passes. What is a

Stuart Mill’s Utilitarianism and Immanuel Kant’s Groundwork of the Metaphysic of Morals respectively. Utilitarianism is an ethical theory that claims that the best action one can perform is the one that brings about the most pleasure, happiness or utility. Utilitarianism is extremely consequentialist in nature, focusing solely on the results of one’s actions and not on intentions or other notions of ideas such as justice or humanity. There are two main branches of utilitarianism: act utilitarianism

yield to them. He said “The determination of the value of an item must not be based on the price, but rather on the utility it yields…. There is no doubt that a gain of one thousand ducats is more significant to the pauper than to a rich man though both gain the same amount.” He suggested there was a function U(w) (called a utility function) which describes the amount of value or utility that the individual gains by having an amount of wealth w. Rational individuals prefer more money to less money

companies chosen for investment comparison are; United Utilities Group Plc (United Utilities) , Pennon Group Plc (Pennon Group) and Severn