ECN 104 Lecture Notes - Lecture 6: Risk Aversion, John Stuart Mill, Bounded Rationality
27 Feb 2016
School
Department
Course
Professor
Document Summary
Thomas s. kuhn, the structure of scientific revolutions (1962) Rational choice: people have consistent preferences, they know what their preferences are, and they act so as to maximize their preferences. - prefer a to c. In some stronger versions of rational choice, it is assumed that people"s preference is to maximize their dollars: see, for example, the text"s long discussion of whether maria should switch her career from financial services to social work. A rational person will try to maximize net benefits, that is, benefits minus costs: an explicit cost is a cost that involves actually laying out money. - tuition: an implicit cost does not require an outlay of money; it is measured by the value, in dollar terms, of the benefits that are forgone. Earning money instead of going to uni. The accounting profit of a business is the business"s revenue minus the explicit costs.
