The Market in Economics: Behavioural Assumptions and Value Judgments.

36 Pages Posted: 7 May 2014

See all articles by Agnar Sandmo

Agnar Sandmo

Norwegian School of Economics (NHH); Norwegian School of Economics (NHH) - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute)

Date Written: April 22, 2014

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

JEL Classification: A13, B40, D01

Suggested Citation

Sandmo, Agnar, The Market in Economics: Behavioural Assumptions and Value Judgments. (April 22, 2014). NHH Dept. of Economics Discussion Paper 12/2014. Available at SSRN: https://ssrn.com/abstract=2432934 or http://dx.doi.org/10.2139/ssrn.2432934

Agnar Sandmo (Contact Author)

Norwegian School of Economics (NHH) ( email )

Helleveien 30
Bergen, NO-5045
Norway
+47 55 95 92 76 (Phone)

Norwegian School of Economics (NHH) - Department of Economics

Helleveien 30
N-5035 Bergen
Norway

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

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