Question

Discuss the role of human behavior in economics by using economic theory. Provide examples and explain in simple words with a reasonable passage length.

Answer 1

Human behavior is also confronted with multiple options available in the market but constrained by limited budget or resources to fulfill those choices.Thus it leads to Scarcity. The human behavior is confronted with three basic questions :

What to consume?

How to consume?

From whom to consume?

Opportunity cost is the benefit foregone by not choosing the second best alternative. For instance a person is confronted with ice cream and Candies. if he chooses to consume candies, he would sacrifice icecream which is termed as his opportunity cost.

Moreover, indifference curve gives the various possible combinations of two commodities capable of providing the same level of satisfaction to the consumers. For instance, the following combinations are given for bread and rice capable of providing the satisfaction level of 100 utils.

Combinations	Bread	Rice
A	5	1
B	3	2
C	2	3
D	1	4

All the combinations give the same level of satisfaction to the consumers. Depending on their choice to have more of Bread or rice, they can choose the combination.