Monday, October 6, 2014

The Foundation of Economics

What is the foundation of Economic activity? Is it exotic formulas and mind boggling mathematical calculations? Many "experts" would lead us to believe this. Economics is based on the notion of human behavior or human action. Economic thinkers believe that all human action is purposeful, and it is about utilizing certain means to obtain ends or goals. Since we only have 24 hours in one day, we must economize those wants. This, by default, creates a priority ranking of things we find that are important. This is known in economics as a utility ranking. As one goes down this "utility ranking", it moves to something that is more valuable to less valuable. This also leads us into the Law of Diminishing Marginal Utility. This law is one of the fundamental laws of Economics. Here are some reads to explain this concept in more detail:

What Can the Law of Diminishing Marginal Utility Teach Us? - Thorsten Polleit - Mises Daily

Diminishing Marginal Utility: It's A Law

Marginal Utility Is Not Rocket Science

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