INTRODUCTION Economics is a behavioral science, after all, it has everything to do with the behavior of man and the choices he makes. A human individual reasons in an ambitious way searching for pleasure and happiness. This results in a person with an unlimited quantity of needs regardless of his/her scarce resources. Let me introduce the economic man and his decision making process.
ECONOMIC MAN According to Investopedia, the term “Economic Man” was developed to portrait a hypothetical individual who is purely rational and whose only motivating forces are economic. It It is a necessary abstraction to construct economic theories. Obviously, the economic man is not a description of a real person but a model of behavior which results useful …show more content…
He also chooses by comparing costs and benefits of doing a little more or a little less of something. This is referred to as choices made at the margin. For example, if I have an exam and an assignment to complete today and only 5 hours available, I have to choose how much time I want to dedicate to each task bearing in mind the cost and benefit implied if I dedicate more time to one task than the other.
ASSUMPTIONS
In the previous section we identified the major assumptions associated with the Economic Man: he acts rationally, his choices seek to maximize his satisfaction and his satisfaction respond to his own self-interest (Rittenberg & Tregarthen, 2012). Economic man’s rational behavior in explained by the rational choice theory: his decisions will always be wise and logical (Investopedia, 2016). There will be no emotion involved in his economic decisions. We assume this economic man has all the information available about his environment and consistently assesses probabilities (Fox, …show more content…
Adam Smith, in his book “The Wealth of Nations”, stated that “It is not from the benevolence of the butcher, the brewer or the baker that we expect our dinner, but from their regard to their own interest.” We infer from this that while satisfying our needs, the butcher, the brewer and the baker are satisfying their own needs for income and economic improvement.
Smith also explains in his book how this search to satisfy each individual’s self-interest will work to promote the common good (Investopedia, 2016). For example, a person studies Medicine because it is of his/her interest and when he/she goes to practice, not only will he/she make profit out of it but also he/she will be providing a service to other people in providing them solutions for their health. And in pursuing this self-interest, the economic man maximizes his level of satisfaction (Rittenberg & Tregarthen, 2012). He will choose the alternative which provides more utility with the resources he has available. One definition provided by the Merriam-Webster online dictionary of maximize is “to find a maximum value of”. Therefore, when the economic man faces the need to choose between two alternatives with his limited resources, he will rationally and self-interestedly choose the one that will bring his satisfaction to the maximum level, thus maximizing the
ECONOMIC MAN According to Investopedia, the term “Economic Man” was developed to portrait a hypothetical individual who is purely rational and whose only motivating forces are economic. It It is a necessary abstraction to construct economic theories. Obviously, the economic man is not a description of a real person but a model of behavior which results useful …show more content…
He also chooses by comparing costs and benefits of doing a little more or a little less of something. This is referred to as choices made at the margin. For example, if I have an exam and an assignment to complete today and only 5 hours available, I have to choose how much time I want to dedicate to each task bearing in mind the cost and benefit implied if I dedicate more time to one task than the other.
ASSUMPTIONS
In the previous section we identified the major assumptions associated with the Economic Man: he acts rationally, his choices seek to maximize his satisfaction and his satisfaction respond to his own self-interest (Rittenberg & Tregarthen, 2012). Economic man’s rational behavior in explained by the rational choice theory: his decisions will always be wise and logical (Investopedia, 2016). There will be no emotion involved in his economic decisions. We assume this economic man has all the information available about his environment and consistently assesses probabilities (Fox, …show more content…
Adam Smith, in his book “The Wealth of Nations”, stated that “It is not from the benevolence of the butcher, the brewer or the baker that we expect our dinner, but from their regard to their own interest.” We infer from this that while satisfying our needs, the butcher, the brewer and the baker are satisfying their own needs for income and economic improvement.
Smith also explains in his book how this search to satisfy each individual’s self-interest will work to promote the common good (Investopedia, 2016). For example, a person studies Medicine because it is of his/her interest and when he/she goes to practice, not only will he/she make profit out of it but also he/she will be providing a service to other people in providing them solutions for their health. And in pursuing this self-interest, the economic man maximizes his level of satisfaction (Rittenberg & Tregarthen, 2012). He will choose the alternative which provides more utility with the resources he has available. One definition provided by the Merriam-Webster online dictionary of maximize is “to find a maximum value of”. Therefore, when the economic man faces the need to choose between two alternatives with his limited resources, he will rationally and self-interestedly choose the one that will bring his satisfaction to the maximum level, thus maximizing the