Question

Briefly identify the basic motives economic theorists conventionally assume when attempting to explain human behavior. (I.e., describe homo economicus.)

Answer 1

The homo economicus is an approach that identifies human being as a rational person that works with the scarce resources with rational thinking to fulfil their optimal needs & wants. While fulfilling the needs, the human being is a person with self-interest and accordingly, he or she performs an activity. If he is a consumer, then he or she wants to maximize the utility by applying the marginal principles. If a human being is a producer, then he or she wants to maximize the profit. These objectives are fulfilled using a rational approach of making a decision.

So, the basic motives assumed by the economic theorists are as follows:

1. The motive to maximize the utility my efficient utilization of resources

2. The motive to earn profit by using factors of production

3. The motive to fulfill the different physiological, safety and psychological needs by evaluating different alternatives and subsequent consumption.