What is economic approach? Rational egoism.Economists see reality in specific prospect. Economic approach, or economic thinking, has several important and closely interconnected characteristics.
Limitation of resources and choice.
economies it is easy for b to understand
From our definition why economists consider the world from the point of view of limitation of resources. As human and material resources are limited, and the goods and services made by us are also limited. Limitation narrows our opportunities and dictates need of the choice. As we “ we cannot have all “ we have to decide what we choose.
The thought that " is the basis of the economy; free lunches do not happen “. You can be treated with a lunch, doing it for you “ free “ but someone all the same should pay for it, finally - to society. For preparation of a lunch it will be necessary to use the earth, the equipment, work of farmers, cooks and waiters, and also to put administrative talent. However these resources could be used also in other production activity. Offered these resources, and also other goods and services which could be made with their help to provide to you “ free “ lunch. Economists call those resources which offered alternative costs.
Rational behavior. the Economy is based by
on the concept “ rational egoism “. In other words, people make rational decisions for achievement of the greatest satisfaction or the fullest realization of the purposes. For example, they spend the income so that to receive the greatest benefit from goods and services which they are able to afford.
The rational behavior means that different people will make the different choice as their preferences, circumstances and information available to them are various. You can decide what in your interests will be to graduate at first from college, and then to begin to work while the schoolmate can make the decision not to continue study, and at once to go to work.
Why you made a different choice? Perhaps, your abilities to study, and also the family income are higher, than at your schoolmate. Perhaps, you are better informed and know that the workers who left college have much higher income and with smaller probability workers with lower education level will appear the unemployed, than. Thus, you choose college, and the former schoolmate - that who has less abilities to training, is less than money less information - chooses work. Both decisions are quite rational, but are accepted under various circumstances and based on the different level of knowledge.
Of course, rational decisions can change in process of change of circumstances. Let`s assume that the federal government will consider that in national interests the number of the workers who left college will be to increase. Then the government can begin to provide free biennial training in local colleges for pupils from needy families. In these new conditions your schoolmate can quite decide to go right after school to college, but not to begin to work.
It is important to remember that rational egoism is not self-love. People are ready to endow something to help members of the family or friends, and money for charity because they derive pleasure endows, acting this way. Parents pay for education of the children as they have satisfaction from the similar choice. Such rational egoism (not self-love!) allows to have the maximum satisfaction from investment of capital in goods and services.
On it, probably, it is worth finishing this article and to wish to all her readers of financial literacy, personal success and efficiency! To fast meetings!]