Question

Which school of modern economic thought seems

most realistic? If this aligns with our studies, did that

have any influence on your decision? If this is

different from our studies, why do you think this

school better characterizes macroeconomic behavior?

Answer 1

Modern economic thought which seems most realistic is about scarcity of resources and opportunity cost. All the organisations, human beings and economy are confronted with scarcity of resources and unlimited wants. Within these limited resources of man, money and materials , they need to take the optimum decision which would maximize the profits. Thus the economics deals with the best decision making with limited resources and unlimited wants which would maximize the profits.

In this scenario of unlimited wants and limited resources, all the major entities are confronted with choosing one best alternative by sacrificing the next best alternative. This concept leads to opportunity cost, where the organizations and the humans choose one alternative and sacrifice the next best alternative. The difference between the alternative chosen and next best alternative is termed as economic gain. If the economic gain is significantly high, there is no dilemma while choosing the best one, but if it is not significant, they are confronted with doubts as to whcih one to choose.

Opportunity cost also influences the decision taken by humans as to which alternative to choose and which one to sacrifice. the decision is generally being taken based economic gain.