Discussion Paper Series in Economics, Department of Economics, Norwegian School of Economics (NHH)
The Market in Economics: Behavioural Assumptions and Value Judgments.
Abstract: This paper tries to convey the essence of the economic
theory of behaviour of individuals and firms to an audience of
non-economists. The hypotheses of utility and profit maximization and their
use as building blocks in the theory of market equilibrium are explained.
The paper discusses the efficiency of the market mechanism and sources of
market failure. It considers the origin of preferences and the role played
by ethical and religious views for consumer demand and labour supply. It
concludes by discussing the role of economic theory in the design of
institutions and considers the view that the introduction of market
incentives in new areas may be harmful to society.
Keywords: Utility and profit maximization; incentives; welfare.; (follow links to similar papers)
JEL-Codes: A13; B40; D01; (follow links to similar papers)
31 pages, April 22, 2014
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