LS7- Decision Making in Economics

Question 1

Deduction

Answer 1

Assumption based on hypothesis

Question 2

Induction

Answer 2

Collecting evidence to make assumptions

Question 3

Rational decision

Answer 3

Economic agents are able to rank the order of the different outcomes from an action, in terms of benefits.
- Making decisions that maximise utility

Question 4

Maximisation- consumers

Answer 4

• economic welfare
• maximise utility from consuming goods
• making choices by comparing utility

Question 5

Maximisation- workers

Answer 5

• wages
• job security
• satisfaction from the job

Question 6

Maximisation- firms

Answer 6

• increase profits
• produce as efficiently as possible meeting consumer wants and needs

Question 7

Maximisation- governments

Answer 7

Welfare of citizens

Question 8

What do economic agents require to make rational decisions?

Answer 8

• time
• information
• ability to process information