ECON 102 Lecture Notes - Lecture 1: Rationality
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All decisions in which we consider a cost and a benefit can be considered economic decisions. Economic analysis is a way of thinking about all decisions. This is true for all the decisions, major and minor. Major decisions: education, career, financing, your home, family. Minor decisions can often be made quickly and without much conscious thought. Making choices is all about comparing the costs and benefits. When examining choices, we often can choose one of many outcomes. Performing a certain economic action will increase our well-being if the benefits are greater than the costs. If costs are greater than the benefits, do not do that action. Economists assume that individuals act as if motivated by self-interest and respond predictably to opportunities to gain. Rationality assumption: the assumption that people do not intentionally make decisions that make them worse off. Proves again that we do what is in our best interest.
