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Business Services Fast Facts, Last Updated:09/06/2010
Understanding choices by individuals and groups is central.
Economists believe that incentives and desires play an important
role in shaping decision making. Concepts from the Utilitarian
school of philosophy are used as analytical concepts within
economics, though economists appreciate that society may not adopt
utilitarian objectives. One example of this is the idea of a
utility
function, which is assumed to represent how economic agents
rank the choices given to them. A given economic alternative can be
thought of as a vector
where the entries are answers to questions like "How many eggs
should I buy?", "How many hours should I spend with my kids?", and
"How much money should I set aside for later?". Then the utility
function ranks these from best to worst, and the agent gradually
learns to choose the best-ranked choice in the feasible set of his
alternatives. |
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