Unit 2.4 - Critique of the maximizing behavior of consumers and producers [HL only]
What you need to know and understand
Key concepts:
Concepts to understand:
- Rational consumer choice [HL only]
- Assumptions—consumer rationality, utility maximization and perfect information
- Behavioral economics—limitations of the assumptions of rational consumer choice
- Biases—rule of thumb, anchoring and framing, availability
- Bounded rationality
- Bounded self-control
- Bounded selfishness
- Imperfect information
- Behavioural economics in action [HL only]
- Choice architecture—default, restricted, and mandated choices
- Nudge theory
- Business objectives [HL only]
- Profit maximization
- Alternative business objectives
- Corporate social responsibility
- Market share
- Satisficing
- Growth
Key concepts:
- Scarcity
- Choice
- Efficiency
- Equity
- Economic well-being
- Sustainability
- Change
- Interdependence
- Intervention
Concepts to understand:
- Economics is a social science characterized by interdependence, which focuses on how people interact with each other to improve their economic well-being, influenced and enabled by their values and their natural surroundings.
- The economic world is dynamic in nature and constantly subject to change.
- Economic theories are based on logic and empirical data, using models to represent and analyze this complex reality. Individual and collective motivations and behaviours are complex and diverse, and their understanding entails the interaction of a variety of disciplines such as philosophy, politics, history, and psychology.
- Economic decision-making impacts the relative economic well-being of individuals and societies.
- The central problems of economics are scarcity and choice. This forces societies to face trade-offs, opportunity costs and the challenge of sustainability.
- Debates exist in economics regarding the potential conflicts between economic growth and equity
- and between free markets and government intervention.
- Endless economic growth, based on the consumption of finite resources, cannot continue indefinitely. New economic models and social movements have challenged mainstream opinion about the purpose of growth and how the economy could be redesigned to support long-term prosperity.
TEXTBOOK unit 2.4
|
|
|
|