Economy is the sphere of social life that covers the interaction of production and consumption.

Economics is a science that studies the behavior of participants in the process of economic activity. It is also a way of organizing people’s activities aimed at creating the benefits they need.

This scientific discipline is divided into two sections: microeconomics and macroeconomics.

Microeconomics involves the analysis of the economic actions of individuals, individual households, firms and industries.

This test will examine some of the components of microeconomics.

Rarity (limited) resources

Any production is usually a targeted expenditure of resources to obtain some results and satisfy needs. If we analyze the economic organization of production, we can say that people live in a world of limited opportunities. People's resources (material, financial, labor, etc.) have qualitative and quantitative limitations.

The scarcity of resources in the modern economy is divided into two types: absolute (lack of resources to satisfy all needs at the same time) and relative (when there are resources to satisfy any part of the needs).

Economic resources are rare or in limited supply, but the needs of society and its members are limitless. Therefore, society is forced to constantly solve the problem of choice, to decide which goods and services should be produced and which to refuse. At the same time, it is necessary to achieve the most appropriate and effective use of rare resources to fully satisfy the needs of society and its members.

Rational economic choice

In conditions of limited resources, a major role is played by the consumer’s choice between options for using resources. The optimality of the economic choice depends on the costs and the result obtained.

There are three main subjects in the economy: the consumer, the producer and society. In conditions of limited resources, the consumer must balance his income with his expenses. The manufacturer decides what to produce, in what quantity, also weighing all costs and income. This is how a rational economic choice is formed. That is, with a minimum of costs, maximum results are ensured.

Based on the cost of the good, which varies widely, the consumer decides what will be profitable for him to purchase. And if he chooses this or that product at a favorable price, knowing that it will bring a good result, then we can talk about a rational (optimal) economic choice. Therefore, it is associated with assessing the opportunity cost of a good.

Household as a market subject

A household is a unit consisting of one or more people. It operates in the consumer sector. Households sell their labor and the goods they own on the market in the form of individual types of goods and services, as well as in the form of land, capital, and property. Most households would like to increase the quantity and quality of goods and services they consume, depending on how limited their income is.

Typical for a household:

· Manual labor;

· Old technology;

· Slow pace of development;

· Traditional production methods.

The household economy has developed since ancient times of the slave, feudal system, and collective farms. Today it can be divided into three main types: urban, rural and country.

In modern society there are two main forms of farming: subsistence and commercial.

In the natural form of economy, the production of material goods and services is carried out for consumption within the economic unit itself.

The commodity form of the economy is a form in which material goods and services are produced by separate commodity producers, each of which specializes in the production of one product, one service, and therefore, in order to satisfy social needs, the need arises for the purchase and sale of goods on the market. The commodity form can be divided into simple production (manual labor) and capitalist production (machine labor).

Today, it is impossible to clearly distinguish between an absolutely natural or an absolutely commodity economy, since usually part of the created material goods and services is consumed within the economic unit itself, and the other part goes for purchase and sale on the market.

There are certain commodity-money relations between the market and the household:

· Purchase of goods and services by households from manufacturers;

· Sales by enterprises of goods and services to the public that were produced by the household;

· Sale by households and people of resources, factors of production - land, labor, capital to enterprises and firms;

· Payment by enterprises and firms to the population and households of appropriate income (wages, profits, interest, etc.)

A household cannot relate entirely to the commodity or natural form, as well as comply with all the conditions for the implementation of commodity-money relations.

A household can produce products both for personal consumption and for sale. At the same time, it, as a market subject, uses personal labor. Although in some cases, a household acquires special household appliances for the production of goods and services, or hires specialists in a particular production area. This will already be called hired labor within the household.

The household acts on the market not only as a buyer of consumer goods. Often he also acts as a supplier of resources to manufacturers or the market.

Thus, the household, as a market subject, is characterized by the fact that it places demand for consumer goods and supplies resources.

Theory of consumer behavior

Total and marginal utility.

Society consists of consumers who have the right to independently choose the product and volume of purchase. He dictates his desires and preferences (freedom of consumer choice), which must be taken into account by the manufacturer. It happens that with the help of advertising, the consumer succumbs to suggestion and purchases an unnecessary product.

There are two main aspects of consumer behavior - their preferences and capabilities. Given the given opportunities, the buyer wants to find a set of goods that would bring him maximum utility and greatest satisfaction.

People consume goods and services because they have the property of being a source of pleasure (useful). The cost of a product is determined not by the labor costs for its production, but by the beneficial effect that it can bring to the consumer. Moreover, each additional unit of goods brings the consumer additional (marginal) utility, which is of a decreasing nature. That is, the greater the number of units of a good consumed, the lower the marginal utility extracted from the consumption of each subsequent unit of this good. Also, three equal factors take part in the creation of utility - labor, capital and land.

Marginal utility is the amount of additional utility obtained from an increase in the amount of consumption of a good by an additional unit, all other things being equal.

Subjective utility presupposes the rarity of a good, the limited size of its supply. It depends on the nature of consumption of goods. As a rule, a commodity producer does not make expenses if they are not justified by the purpose, results, and usefulness of future benefits. But at the same time, obtaining a result, achieving utility is unthinkable without costs.

Overall utility is the rational option that most consumers strive for. It forms consumer equilibrium. That is, by consuming a certain number of units of a good, a person receives total utility, which consists of the sum of diminishing marginal utilities.

Thus, most consumers seek to maximize total utility.

By maximizing the difference between total and marginal utility, the consumer can benefit or save his resources, since a unit of a good purchased by a person will have neither marginal nor total utility for him unless the person purchases the good or service in large quantities. The consumer's response is influenced by changes in income, so his choice may be unpredictable. It turns out that when maximizing the difference between total and marginal utility, he does not receive satisfaction. And this will not be allowed by the manufacturer himself, who will try to lure the buyer with discounts, advertising and other means.

The consumer will not maximize marginal utility, since according to the theory of consumer behavior it can be assumed that he will look for the optimal solution in conditions of limited resources. But it is impossible to maximize both types of utility, since these concepts are incompatible.

In order to obtain maximum utility from the consumption of a given set of goods over a limited period of time, each of them must be consumed in such quantities that the marginal utility of all consumed goods will be equal to the same value. Thus, the consumer strives to obtain the same (total) utility from each product.

Perfect competition

This type of competition exists in areas of activity where many producers offer a similar product, but none of them is able to influence the price of the product.

In a real economy, a perfectly competitive market practically does not occur. It represents the ideal structure that modern markets can only aspire to (the first statement is true). Although, if we compare the point of view that V.M. Kozyrev put forward in his textbook. "Fundamentals of Modern Economics", then we can assume that such markets existed.

Due to the great shortcomings of this type of competition, in the process of developing a market economic system, it gives way to imperfect competition. Even if the market is very similar to the relations of perfect competition, then one of its main characteristic features is necessarily not observed or not fully fulfilled:

· A large number of sellers and buyers;

· The product sold is the same for all manufacturers, and the buyer can choose any seller of the product to make a purchase;

· The inability to control the price and volume of purchase and sale creates conditions for constant fluctuation of these values ​​under the influence of changes in market conditions;

· All buyers and sellers have the same and complete information about the market (no one knows more);

· Complete freedom to “enter” and “leave” the market.

In a competitive market, manufacturers strive to reduce production costs per unit of output to maximize profits. As a result, the price can be reduced, which increases sales and income for the manufacturer. So the price of this producer’s product cannot be equal to his marginal revenue (the second statement is false).

There is a method in economics that allows you to quickly determine the nature of competition: this is the nature of the price response to changes in supply and demand. For the demand for the products of an individual firm under perfect competition, price is a given value. Neither the buyer nor the seller can influence its change, since if the seller asks for a higher price, then buyers will switch to his competitors. If he asks for a lower price, he will not satisfy all demand (the share of his product on the market is not large). Thus, adaptation to the market under conditions of perfect competition is expressed in the volume of sales and the volume of purchases.

The manufacturer sells its product at the existing market price. The demand curve under perfect competition is perfectly elastic and horizontal. 3

(third statement is incorrect)

Perfect competition is, of course, the most effective of all market structures, since at all times competition will always give rise to concern for the manufacturer for his product. He will constantly change its components, its assortment, update it, which is very important for the buyer, at the same time monitor his competitors, open new points, expand his business, attracting new specialists. The income of such a manufacturer will grow, outpacing the demand for its product or services.

Conclusion

Every person is essentially an economist. All his life he has felt the limitations of his resources and tries to combat this through savings. He strives to maximize the benefits he needs, as a result making rational economic choices.

The market is a huge system of constant interaction between the buyer and the manufacturer. Any seller will always try to attract more consumers than his competitor, by any known means. The manufacturer must take into account the desires of the consumer and his capabilities.

New subjects and objects of commodity relations constantly appear in the market system. And some relationships that exist and change over time, such as the household, will not become a thing of the past, since it is one of the foundations of the economy.

Literature

1. Eletsky N.D., Kornienko O.V. Economic theory. Rostov-on-Don, 2002.

2. Ilyin S.S., Marenkov N.L. Fundamentals of Economics. M., 2004.

3. Kozyrev V.M. Fundamentals of modern economics. M., 1999.

4. Modern economics, ed. Mamedova O.Yu., student allowance. Rostov-on-Don, 1998.

5. Economic theory, textbook, ed. Belokrylova O.S. Rostov-on-Don, 2006.

From Wikipedia, the free encyclopedia

This article is about the theory of economics. For rational choice theory as applied to criminology, see rational choice theory (criminology).

Part of the series on
economy

Rational choice theory, also known as choice theory or theory of rational action, is the basis for understanding and often formally modeling socio-economic behavior. The basic premise of rational choice theory is that aggregate social behavior results from the behavior of individual actors, each of whom contributes their individual decisions. The theory also focuses on the determinants of individual choice (methodological individualism).

Rational choice theory then assumes that a person has preferences among available choices that allow them to indicate which option they prefer. These preferences are not considered complete (a person can always say which of two alternatives they consider preferable or which is preferable to the other) and transitive (if option A is preferable to option B and option B is preferable to option C, then A is more preferable than C ). A rational agent is expected to take into account available information, probabilities of events, and potential costs and benefits in determining preferences, and act consistently in choosing the self-determined best course of action.

Rationality is widely used as an assumption about human behavior in microeconomic models and analysis, and appears in almost all economics textbooks on human decision-making procedures. It is also used in political science, sociology and philosophy. A specific variant of rationality is instrumental rationality, which involves searching for the most cost-effective means to achieve a particular goal without thinking about the merits of that goal. Gary Becker was an early proponent of applying rational actor models more widely. Becker won the 1992 Nobel Prize in Economics for his research on discrimination, crime and human capital.

Definition and scope

The concept of rationality as used in rational choice theory is different from the colloquial and most philosophical uses of the word. Colloquially, "rational" behavior generally means "reasonable," "predictable," or "in a thoughtful, clear-headed manner." Rational choice theory uses a narrower definition of rationality. At the most basic level, behavior is rational if it is goal-directed, reflective (evaluative), and consistent (across different choice situations). This contrasts with behavior that is random, impulsive, conditioned or adopted (unevaluative) imitation.

The preference between two alternatives may be:

• Strict preference occurs when a person prefers more 1 s on 2 and not Not treat them as equally preferable.
• Weak preference it follows that the individual either strictly prefers 1 over 2 or indifferent between them.
• Indifference occurs whenever a person prefers on 1 to V 2, neither 2 to 1 . Since (in full) a person does notrefusescomparisons, they must therefore be indifferent in this case.

Research that began in the 1980s sought to develop models that challenge these assumptions and argue that such behavior can still be rational, Anand (1993). This work, often carried out by economic theorists and analytical philosophers, suggests, ultimately, that the assumptions or axioms above are not entirely accurate at all and can perhaps be regarded as approximate at best.

Additional Assumptions

• Perfect information: The simple rational choice model above assumes that a person has complete or perfect information about the alternatives, that is, ranking between two options does not involve uncertainty.
• Choice under conditions of uncertainty: In a richer model that includes uncertainty in how choices (actions) lead to possible outcomes, a person is actually choosing between lotteries, where each lottery causes a different probability distribution over the outcomes. The additional assumption of the independence of extraneous alternatives then leads to expected utility theory.
• Intertemporal choice: When decisions affect choices (such as consumption) at different points in time, the standard method for evaluating alternatives across time involves discounting the future payoff.
• Limited cognitive ability: Identifying and weighing each alternative against every other can take some time, effort and mental capacity. Recognizing that these costs impose or cognitive limitations on individuals leads to the theory of bounded rationality.

Alternative theories of human action include components such as Amos Tversky and Daniel Kahneman's prospect theory, which reflects the empirical finding that, in contrast to standard preferences assumed by neoclassical economics, people attach additional value to objects that they already is compared to similar items owned by others. According to standard preferences, the amount a person is willing to pay for a good (such as a drinking mug) is considered to be equal to the amount he or she is willing to pay to part with it. In experiments, the latter price is sometimes significantly higher than the former (but see Plott and Zeiler 2005, Plott and Zeiler 2007, and Klass and Zeiler 2013). Tversky and Kahneman do not characterize loss aversion as irrational. Behavioral economics includes a large number of other changes to its picture of human behavior that go against neoclassical assumptions.

utility maximization

Often preferences are described by their utility features or payoff functions. This is the ordinal number that a person assigns to more accessible actions, such as:

U (a i) > U (a J) , (\displaystyle U\left(a_(i)\right)>U\left(a_(j)\right).)

The individual's preferences are then expressed as the relationship between these ordinal tasks. For example, if a person prefers candidate Sarah over Roger for abstinence, their preferences will be related to:

U (Sara) > U (Roger) > U (abstain), (\displaystyle U\left((\text (Sara))\right)>U\left((\text (Roger))\right)>U\ left ((\text (abstain))\right).)

A preference relation, which, as stated above, satisfies completeness, transitivity, and, in addition, continuity, can be equivalently represented by a utility function.

criticism

Both assumptions and behavioral predictions of rational choice theory have drawn criticism from various camps. As mentioned above, some economists have developed models of bounded rationality that hope to be more psychologically plausible without completely abandoning the idea that reason underlies decision-making processes. Other economists have developed several theories of human decision making that allow for the role of uncertainty as well as the determination of individual tastes by their socioeconomic conditions (see Fernandez-Huerga, 2008).

Other social scientists, inspired in part by Bourdieu's thinking, have expressed concern about the misuse of economic metaphors in other contexts, suggesting that this may have political consequences. The argument they make is that by viewing everything as a kind of "economy", they make a particular vision of the way the economy works seem more natural. Thus, they suggest, rational choice is as much ideological as it is scientific that it does not itself deny its scientific usefulness.

The evolutionary psychology perspective is that many of the apparent contradictions and biases regarding rational choice can be explained rationally in the context of maximizing biological fitness in the ancestral environment, but not necessarily in the current one. Thus, when living at the subsistence level, where the reduction of resources may have meant death, it may have been rational to place more weight on losses than on gains. Proponents argue that this may also explain differences between groups.

Benefits

The choice approach allows rational preferences to be represented as real utility functions. The economic decision-making process becomes a problem of maximizing this

Utility maximization rule

Critics of marginal utility theory have formulated the water-diamond paradox. They believed that water should have maximum utility, since it is vital, and diamonds should have minimal utility, since one can easily live without them. Therefore, the price of water should be higher than that of diamonds.

This contradiction was resolved as follows. In nature, water supplies are unlimited, and diamonds are rare. Consequently, the total utility of water is large, but the marginal utility is small, while for diamonds, on the contrary, the total utility is small, but the marginal utility is large. Price is determined not by total utility, but by marginal utility. The relationship between marginal utility and price can be illustrated by the following formula:

Where M.U. x , M.U. y , M.U. z– marginal utility of goods; P x , R y , R z– the price of these goods.

This ratio demonstrates utility maximization rule: consumer income must be distributed in such a way that the last ruble spent on the acquisition of each type of good would bring the same marginal utility. For example, a consumer intends to purchase three goods A, IN, WITH to meet your needs. Let us assume that the marginal utility of a good A is 100 utils, good B– 80 util, good WITH– 45 util. At the same time, the price of the good A equal to 100 rubles, good B– 40 rubles, good WITH– 30 rub. Let's present these data in the table. 4.2.

Table 4.2

Marginal utility and price of goods

As can be seen from the table, the distribution of consumer funds does not bring him maximum utility, since the rule of utility maximization is not observed. Because good IN brings maximum weighted utility (i.e., marginal utility per 1 ruble of costs), then money must be distributed in such a way as to increase the amount of consumption of good B and reduce the consumption of good A. In this case, the rule of utility maximization must be fulfilled.

The consumer should refuse the last copy of the good A, and buy with the saved 100 rubles. 2.5 parts good IN. As a result, we obtain the following relationship (Table 4.3).

Table 4.3

Consumer equilibrium in cardinalist theory

Having thus distributed money income among goods A, IN And WITH, the consumer will be able to obtain maximum satisfaction of his needs.

The problem of choice is one of the central ones in economics. The two main actors in the economy - the buyer and the producer - are constantly involved in choice processes. The consumer decides what to buy and at what price. The manufacturer decides what to invest in and what goods to produce.

One of the basic assumptions of economic theory is that people make rational choices. Rational choice means the assumption that a person's decision is the result of an orderly thought process. The word “orderly” is defined by economists in strict mathematical terms. A number of assumptions about human behavior are introduced, which are called axioms of rational behavior.

Provided that these axioms are true, a theorem is proven about the existence of a certain function that establishes human choice - a utility function. Usefulness is the value that is maximized by a person with rational economic thinking in the selection process. We can say that utility is an imaginary measure of the psychological and consumer value of various goods.

Decision-making problems involving consideration of utilities and probabilities of events were the first to attract the attention of researchers. The formulation of such problems is usually as follows: a person chooses some actions in a world where the resulting result (outcome) of the action is influenced by random events that are beyond the control of a person, but having some knowledge about the probabilities of these events, a person can calculate the most advantageous combination and order of his actions. actions.

Note that in this formulation of the problem, action options are usually not assessed according to many criteria. Thus, a simpler (simplified) description of them is used. Not one, but several sequential actions are considered, which makes it possible to build so-called decision trees (see below).

A person who follows the axioms of rational choice is called in economics a rational person.

2. Axioms of rational behavior

Six axioms are introduced and the existence of a utility function is proved. Let us give a meaningful presentation of these axioms. Let us denote by x, y, z the various outcomes (results) of the selection process, and by p, q - the probabilities of certain outcomes. Let's introduce the definition of a lottery. A lottery is a game with two outcomes: outcome x, obtained with probability p, and outcome y, obtained with probability 1-p (Fig. 2.1).

Fig.2.1. Lottery presentation

An example of a lottery is tossing a coin. In this case, as is known, with probability p = 0.5 heads or tails appear. Let x = $10 and

y = - $10 (i.e., we get $10 when heads come up and pay the same amount when tails come up). The expected (or average) price of a lottery is determined by the formula рх+(1-р)у.

Let us present the axioms of rational choice.

Axiom 1. Outcomes x, y, z belong to the set A of outcomes.

Axiom 2. Let P stand for strict preference (similar to the relation > in mathematics); R - loose preference (similar to relation ³); I - indifference (similar to attitude =). It is clear that R includes P and I. Axiom 2 requires the fulfillment of two conditions:

1) connectivity: either xRy, or yRx, or both;

2) transitivity: xRy and yRz imply xRz.

Axiom 3. The two shown in Fig. 2.2 lotteries are in a relationship of indifference.

Rice. 2.2. Two lotteries in a relation of indifference

The validity of this axiom is obvious. It is written in standard form as ((x, p, y)q, y)I (x, pq, y). Here on the left is a complex lottery, where with probability q we get a simple lottery, in which with probability p we get outcome x or with probability (1-p) - outcome y), and with probability (1-q) - outcome y.

Axiom 4. If xIy, then (x, p, z) I (y, p, z).

Axiom 5. If xPy, then xP(x, p, y)Py.

Axiom 6. If xPyPz, then there is a probability p such that y!(x, p, z).

All the above axioms are quite simple to understand and seem obvious.

Assuming that they are satisfied, the following theorem was proven: if axioms 1-6 are satisfied, then there is a numerical utility function U defined on A (the set of outcomes) and such that:

1) xRy if and only if U(x) > U(y).

2) U(x, p, y) = pU(x)+(l-p)U(y).

The function U(x) is unique up to a linear transformation (for example, if U(x) > U(y), then a+U(x) > > a+U(y), where a is a positive integer) .

RATIONAL CHOICE

RATIONAL CHOICE

(rational choice) A school of thought or approach to the study of politics that considers the individual actor as the basic unit of analysis and models politics on the assumption that individuals behave rationally or examines the possible political consequences of rational behavior. Authors who take the position of rational choice usually limit rationality to the framework of transitivity and constancy of choice. Individual choice is transitive when someone, preferring A B, A B C, when choosing between A And IN also gives preference A. This choice is considered constant if, being in the same conditions with the same set of options, a person always makes the same choice. Rational choice is divided into public choice and social choice.

Policy. Dictionary. - M.: "INFRA-M", Publishing House "Ves Mir". D. Underhill, S. Barrett, P. Burnell, P. Burnham, etc. General editor: Doctor of Economics. Osadchaya I.M.. 2001 .

Political science. Dictionary. - RSU. V.N. Konovalov. 2010.

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Books

• Microeconomics: A Very Short Introduction, Dixit Avinash. Microeconomics (individual choice of where to live and work, how much to save, what to buy, decisions of firms where to locate, who to hire, who to fire, where to invest)…
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