The Market in Economics: Behavioural Assumptions and Value Judgments

Agnar Sandmo

No 12/2014, Discussion Paper Series in Economics from Norwegian School of Economics, Department of Economics

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. (search for similar items in EconPapers)
JEL-codes: A13 B40 D01 (search for similar items in EconPapers)
Pages: 31 pages
Date: 2014-04-22
New Economics Papers: this item is included in nep-hpe and nep-upt
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Citations: View citations in EconPapers (2)

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