ECN 203 Chapter Notes - Chapter 2: Discount Window, The Environmentalist, Risk Perception
Document Summary
2. 1 modeling individual choice our assumption and definitions. In a garden eden there are very strong assumptions : no scarcity, no production is necessary, no future, no risk or uncertainty. One must define terms before model can even be made. To make a model of individual choice one must make assumption of motives. Economists assume everyone"s utilities may be different but the assumption is that everyone seeks to maximize their utilities. Goods- things that provide utility when consumed, that are tangible, and that can be stored. Services- things that provide utility when consumed that cannot be stored (like a haircut) Economist assume individuals consume goods and services in order to maximize utility. Everyone knows her own preference ordering (rank available choices in order of the utility they offer) Everyone is rational (internally consistent logic that guides his/her choice process) As a person consumes a utility it diminishes with each successive unit consumed.
