Explain the concept of optimising behaviour

Reference no: EM133714200

Question: Members of the Chicago school stress the neoclassical principle that people attempt to maximize their well-being; that is, they engage in optimizing behaviour at the time of their decisions. The basic economic unit is the individual. Individuals combine into larger units-families, political interest groups, business organizations-as a way to achieve gains from specialization and exchange. People make rational choices, although such choices do not always produce the results expected. Benefits and costs are uncertain. To reduce this uncertainty, the decision maker seeks information, but only to the point where the marginal benefit from the extra information equals the marginal cost of obtaining it (MB=MC). Consumers, workers, and firms respond to monetary incentives and disincentives. Explain the concept of optimising behaviour proposed by the new classicism.

Reference no: EM133714200

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