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Learn the toughest concepts covered in Microeconomics with step-by-step video tutorials and practice problems by world-class tutors

Basic Principles of Economics

People Are Rational

Let's discuss rationality, economic incentives, and marginal decision making:)

People Are Rational

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So let's go ahead and define some key ideas or what we can think of as assumptions for this course. The first one here is that people are rational and I know some of you already saying whoa brian look I've got my share of crazy ex girlfriends too. It's okay in this class when we define rational we're thinking individuals and firms are attempting to do their best right there trying to do their best with what they have and are best. It's not always perfect, but we do the best with what we have. So the idea here is like we're not intentionally trying to make ourselves worse off, right? We're not intentionally uh self destructive. We'll say not intentionally self destructive. All right. That's the idea of being rational here. So when you take an exam right, you're gonna go into the exam, you're gonna study for the exam, you're gonna use clutch and you know, if there's something on the exam that you don't know, you're gonna do your best guess right? You're gonna try your best to get it right, you're not just gonna go in there and just start bubbling at random and see what happens. Right then? Then why would you even be in the course? Um Another example how about a factory, a manager of a factory? Right? He's gonna he doesn't have unlimited money. He doesn't he's not gonna be wasting resources, right? He's not gonna be just throwing stuff away. He's gonna be trying to maximize his output and minimizing his inputs right? You know minimizing inputs or minimizing waste all these things just to do his best.

In economics, marginal means