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Explain the key assumptions and desired properties commonly used economics.
Economists generally make all or some of the given key assumptions and a condition while they study economic problems as follows:
a. Individuals are restricted rational: self-interested behavior assumption;
b. Scarcity of resources: individuals tackle scarce resources;
c. Information regarding individual’s economic characteristics and actions is unfinished or asymmetric to a decision marker. As like a decentralized decision making is wanted.
d. Economic freedom: It is voluntary cooperation and voluntary exchange;
e. Incentive compatibility of parties: there the system or economic mechanism must solve the problem of interest conflicts in between individuals or economic units;
f. Well-described property rights;
g. Equity into opportunity;
h. Allocate efficiency of resources;
Relaxing any of such assumptions may result in various conclusions.
Explain the roles of economics theory. Roles of Economic Theory An economic theory has three probable roles: a. This can be used to describe economic behavior and economi
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discuss the trend and composition of national income and per capital income
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1. What are externalities? Give an example of positive and negative externality and explain why the market outcomes are inefficient in the presence of externalities? 2. What are
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