Rational decision making
- A rational decision is where the consumer allocates their resources in order to maximise utility and the producer allocates their resources to maximise profits.
- The government is assumed to want to maximise the welfare of citizens and workers are assumed to want to maximise their own welfare at work, thus both parties allocate resources to do so.
- Market – Where consumers and producers meet with each other to trade goods and services.
- Utility – The amount of satisfaction obtained from consuming a product.