{"id":4755,"date":"2017-07-01T02:48:28","date_gmt":"2017-07-01T02:48:28","guid":{"rendered":"https:\/\/courses.lumenlearning.com\/wm-macroeconomics\/chapter\/outcome-economic-rationality\/"},"modified":"2018-07-23T16:17:52","modified_gmt":"2018-07-23T16:17:52","slug":"outcome-economic-rationality","status":"publish","type":"chapter","link":"https:\/\/courses.lumenlearning.com\/oldwestbury-wm-macroeconomics\/chapter\/outcome-economic-rationality\/","title":{"raw":"Introduction to the Economic Way of Thinking","rendered":"Introduction to the Economic Way of Thinking"},"content":{"raw":"

What you\u2019ll learn to do:\u00a0explain the assumption of economic rationality, define marginal analysis, and differentiate between positive and normative reasoning.<\/h2>\r\n\"Person<\/a>\r\n\r\nThis module is about how economists analyze issues and problems, which is sometimes referred to as the \"economic way of thinking.\" In the previous sections of the module, we explored two common models used by economists to think about economic issues. Now we segue into introducing some specific features of economic thinking: economic rationality, marginal analysis, and positive vs. normative reasoning.\r\n\r\nEconomists assume that humans make\u00a0decisions in\u00a0predictable ways.\u00a0They believe that, when making choices, people try to avoid costs\u00a0and maximize benefits to themselves.This is what economists mean by rational decision-making.\r\n\r\nEconomists recognize that very few\u00a0choices in the real world are \u201call or nothing.\u201d Most of the time, people have the choice\u00a0to do a little more or a little less of something: Should you eat one more muffin? Should you study economics for another\u00a0hour? Should you spend a little less money on gas? Economists use the word\u00a0marginal<\/em>\u00a0to mean \u201cadditional\u201d or \u201cextra,\u201d and they use the term\u00a0marginal analysis<\/em>\u00a0to describe how people make choices by comparing the\u00a0benefits and costs of doing a bit more or a bit less.\r\n\r\nEconomists can make two kinds of arguments.\u00a0Positive reasoning\u00a0is\u00a0scientific reasoning, based on theories and evidence.\u00a0Policy decisions often employ\u00a0normative reasoning, which\u00a0is based on values.\u00a0For reasons we will see later, it is important to be able to to differentiate between the two.","rendered":"

What you\u2019ll learn to do:\u00a0explain the assumption of economic rationality, define marginal analysis, and differentiate between positive and normative reasoning.<\/h2>\n

\"Person<\/a><\/p>\n

This module is about how economists analyze issues and problems, which is sometimes referred to as the “economic way of thinking.” In the previous sections of the module, we explored two common models used by economists to think about economic issues. Now we segue into introducing some specific features of economic thinking: economic rationality, marginal analysis, and positive vs. normative reasoning.<\/p>\n

Economists assume that humans make\u00a0decisions in\u00a0predictable ways.\u00a0They believe that, when making choices, people try to avoid costs\u00a0and maximize benefits to themselves.This is what economists mean by rational decision-making.<\/p>\n

Economists recognize that very few\u00a0choices in the real world are \u201call or nothing.\u201d Most of the time, people have the choice\u00a0to do a little more or a little less of something: Should you eat one more muffin? Should you study economics for another\u00a0hour? Should you spend a little less money on gas? Economists use the word\u00a0marginal<\/em>\u00a0to mean \u201cadditional\u201d or \u201cextra,\u201d and they use the term\u00a0marginal analysis<\/em>\u00a0to describe how people make choices by comparing the\u00a0benefits and costs of doing a bit more or a bit less.<\/p>\n

Economists can make two kinds of arguments.\u00a0Positive reasoning\u00a0is\u00a0scientific reasoning, based on theories and evidence.\u00a0Policy decisions often employ\u00a0normative reasoning, which\u00a0is based on values.\u00a0For reasons we will see later, it is important to be able to to differentiate between the two.<\/p>\n\n\t\t\t

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Candela Citations<\/h3>\n\t\t\t\t\t
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