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Question: What are the values and assumptions of economics and business

17 Oct 2022,9:42 PM

 

What are the values and assumptions of economics and business

 

Course name: AP/ADMS1010 V & W - Exploring the Functions of Business
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Describe the values underlying neoclassical economics and explain why the field relies heavily on very specific assumptions about human behaviour. How have these assumptions been refuted by the emerging field of behavioral economics? Give an example from your personal experience of how you violated one of the central assumptions of neoclassical economics. Explain how and why.

Required Readings

Corporate Finance Institute (2021). Neoclassical Economics and Assumptions

Expert answer

 

The economic way of thinking views the world as a market place. In this market place, people are rational and self-interested. They make decisions based on what is best for them.

 

This view of the world has a number of implications for how we think about business. First, businesses are seen as profit-maximizing entities. They exist to make money. This means that they will make decisions based on what will make them the most money.

 

Second, businesses are seen as competing with each other. They are in competition for customers and resources. This competition drives businesses to be efficient and to innovate.

 

Third, businesses are seen as being subject to the laws of supply and demand. Prices are determined by how much people are willing to pay for a good or service.

 

Fourth, businesses are seen as being part of the larger economy. They are affected by economic conditions such as inflation and recession.

 

Lastly, businesses are seen as having an impact on society. They can have positive or negative effects on society depending on their actions.

 

These are some of the values and assumptions of economics and business. Understanding these concepts can help you to think about business in a more thoughtful and critical way.

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