1). Rational Decision Making

• What are the underlying assumptions of rational economic decision-making?

  • Consumers aim to maximise their utility
  • Firms aim to maximise profits
  • Governments aim to maximise social welfare
• Rational behaviour of households:

  • The maximisation of private benefit from consumption
  • The maximisation of private benefit from working
• Rational behaviour of firms:

  • Profit maximisation
  • Profit satisfying
  • Sales maximisation
  • Economic growth
• What are private benefits?

  Private benefits refer to the advantages or rewards that accrue to

  an individual or firm through economic activity.