Economic Choice, Agency Theory, and Business Strategy
Classified in Economy
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T1: Economic Choice and Behavioral Models
The fundamental economic problem involves limited resources and unlimited wants.
Principles of Economic Choice
- Marginal Analysis
- Cost-Benefit Analysis
Models of Behavior
Behavioral models often contrast:
- Monetary Compensation (Only money matters)
- Intrinsic Motivation (Happy is productive)
Risky Outcomes and Utility
Individuals react differently to risk, defined by their utility function:
- Risk Averse
- Risk Neutral
- Risk Lover
T2: Market Economies Versus Central Planning
The Market Economy Framework
Key components of a market economy include:
- Property Rights: Alienable rights and use rights.
- Organization: Composition, social rules, and gains from trade.
- Generalization: Demand curve, supply curve, and the market-clearing price.