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Utility
As a topic of economics, utility is used to model worth or value. Its usage has evolved significantly over time. The term was introduced initially as a measure of pleasure or happiness as part of the theory of utilitarianism by moral philosophers such as Jeremy Bentham and John Stuart Mill. The term has been adapted and reapplied within neoclassical economics, which dominates modern economic theory, as a utility function that represents a single consumer's preference ordering over a choice set but is not comparable across consumers. This concept of utility is personal and based on choice rather than on pleasure received, and so is specified more rigorously than the original concept but makes it less useful (and controversial) for ethical decisions. Utility function Consider a set of alternatives among which a person can make a preference ordering. The utility obtained from these alternatives is an unknown function of the utilities obtained from each alternative, not the su ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Utilitarianism
In ethical philosophy, utilitarianism is a family of normative ethical theories that prescribe actions that maximize happiness and well-being for all affected individuals. Although different varieties of utilitarianism admit different characterizations, the basic idea behind all of them is, in some sense, to maximize utility, which is often defined in terms of well-being or related concepts. For instance, Jeremy Bentham, the founder of utilitarianism, described ''utility'' as: That property in any object, whereby it tends to produce benefit, advantage, pleasure, good, or happiness ... rto prevent the happening of mischief, pain, evil, or unhappiness to the party whose interest is considered. Utilitarianism is a version of consequentialism, which states that the consequences of any action are the only standard of right and wrong. Unlike other forms of consequentialism, such as egoism and altruism, utilitarianism considers the interests of all sentient beings equally ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Preference (economics)
In economics and other social sciences, preference is the order that an agent gives to alternatives based on their relative utility. A process which results in an "optimal choice" (whether real or theoretical). Preferences are evaluations and concern matters of value, typically in relation to practical reasoning. The character of the preferences is determined purely by a person's tastes instead of the good's prices, personal income, and the availability of goods. However, people are still expected to act in their best (rational) interest. Rationality, in this context, means that when individuals are faced with a choice, they would select the option that maximizes self-interest. Moreover, in every set of alternatives, preferences arise. The belief of preference plays a key role in many disciplines, including moral philosophy and decision theory. The logical properties that preferences possess have major effects also on rational choice theory, which has a carryover effect on all m ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Indifference Curve
In economics, an indifference curve connects points on a graph representing different quantities of two goods, points between which a consumer is ''indifferent''. That is, any combinations of two products indicated by the curve will provide the consumer with equal levels of utility, and the consumer has no preference for one combination or bundle of goods over a different combination on the same curve. One can also refer to each point on the indifference curve as rendering the same level of utility (satisfaction) for the consumer. In other words, an indifference curve is the locus of various points showing different combinations of two goods providing equal utility to the consumer. Utility is then a device to represent preferences rather than something from which preferences come. The main use of indifference curves is in the representation of potentially observable demand patterns for individual consumers over commodity bundles. There are infinitely many indifference curves: ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Welfare Economics
Welfare economics is a branch of economics that uses microeconomic techniques to evaluate well-being (welfare) at the aggregate (economy-wide) level. Attempting to apply the principles of welfare economics gives rise to the field of public economics, the study of how government might intervene to improve social welfare. Welfare economics also provides the theoretical foundations for particular instruments of public economics, including cost–benefit analysis, while the combination of welfare economics and insights from behavioral economics has led to the creation of a new subfield, behavioral welfare economics. The field of welfare economics is associated with two fundamental theorems. The first states that given certain assumptions, competitive markets produce ( Pareto) efficient outcomes; it captures the logic of Adam Smith's invisible hand. The second states that given further restrictions, any Pareto efficient outcome can be supported as a competitive market equilibriu ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Social Welfare Function
In welfare economics, a social welfare function is a function that ranks social states (alternative complete descriptions of the society) as less desirable, more desirable, or indifferent for every possible pair of social states. Inputs of the function include any variables considered to affect the economic welfare of a society. In using welfare measures of persons in the society as inputs, the social welfare function is individualistic in form. One use of a social welfare function is to represent prospective patterns of collective choice as to alternative social states. The social welfare function provides the government with a simple guideline for achieving the optimal distribution of income. The social welfare function is analogous to the consumer theory of indifference-curve–budget constraint tangency for an individual, except that the social welfare function is a mapping of individual preferences or judgments of everyone in the society as to collective choices, which ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Microeconomics
Microeconomics is a branch of mainstream economics that studies the behavior of individuals and firms in making decisions regarding the allocation of scarce resources and the interactions among these individuals and firms. Microeconomics focuses on the study of individual markets, sectors, or industries as opposed to the national economy as whole, which is studied in macroeconomics. One goal of microeconomics is to analyze the market mechanisms that establish relative prices among goods and services and allocate limited resources among alternative uses. Microeconomics shows conditions under which free markets lead to desirable allocations. It also analyzes market failure, where markets fail to produce efficient results. While microeconomics focuses on firms and individuals, macroeconomics focuses on the sum total of economic activity, dealing with the issues of growth, inflation, and unemployment and with national policies relating to these issues. Microeconomics also d ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Neoclassical Economics
Neoclassical economics is an approach to economics in which the production, consumption and valuation (pricing) of goods and services are observed as driven by the supply and demand model. According to this line of thought, the value of a good or service is determined through a hypothetical maximization of utility by income-constrained individuals and of profits by firms facing production costs and employing available information and factors of production. This approach has often been justified by appealing to rational choice theory, a theory that has come under considerable question in recent years. Neoclassical economics historically dominated macroeconomics and, together with Keynesian economics, formed the neoclassical synthesis which dominated mainstream economics as "neo-Keynesian economics" from the 1950s to the 1970s.Clark, B. (1998). ''Principles of political economy: A comparative approach''. Westport, Connecticut: Praeger. Nadeau, R. L. (2003). ''The Wealth o ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Pareto Efficiency
Pareto efficiency or Pareto optimality is a situation where no action or allocation is available that makes one individual better off without making another worse off. The concept is named after Vilfredo Pareto (1848–1923), Italian civil engineer and economist, who used the concept in his studies of economic efficiency and income distribution. The following three concepts are closely related: * Given an initial situation, a Pareto improvement is a new situation where some agents will gain, and no agents will lose. * A situation is called Pareto-dominated if there exists a possible Pareto improvement. * A situation is called Pareto-optimal or Pareto-efficient if no change could lead to improved satisfaction for some agent without some other agent losing or, equivalently, if there is no scope for further Pareto improvement. The Pareto front (also called Pareto frontier or Pareto set) is the set of all Pareto-efficient situations. Pareto originally used the word "optimal" fo ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Gérard Debreu
Gérard Debreu (; 4 July 1921 – 31 December 2004) was a French-born economist and mathematician. Best known as a professor of economics at the University of California, Berkeley, where he began work in 1962, he won the 1983 Nobel Memorial Prize in Economic Sciences. Biography His father was the business partner of his maternal grandfather in lace manufacturing, a traditional industry in Calais. Debreu was orphaned at an early age, as his father committed suicide and his mother died of natural causes. Prior to the start of World War II, he received his baccalauréat and went to Ambert to begin preparing for the entrance examination of a grande école. Later on, he moved from Ambert to Grenoble to complete his preparation, both places being in Vichy France during World War II. In 1941, he was admitted to the École Normale Supérieure in Paris, along with Marcel Boiteux. He was influenced by Henri Cartan and the Bourbaki writers. When he was about to take the final examinati ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Intelligent Agent
In artificial intelligence, an intelligent agent (IA) is anything which perceives its environment, takes actions autonomously in order to achieve goals, and may improve its performance with learning or may use knowledge. They may be simple or complex — a thermostat is considered an example of an intelligent agent, as is a human being, as is any system that meets the definition, such as a firm, a state, or a biome. Leading AI textbooks define "artificial intelligence" as the "study and design of intelligent agents", a definition that considers goal-directed behavior to be the essence of intelligence. Goal-directed agents are also described using a term borrowed from economics, "rational agent". An agent has an "objective function" that encapsulates all the IA's goals. Such an agent is designed to create and execute whatever plan will, upon completion, maximize the expected value of the objective function. For example, a reinforcement learning agent has a "reward funct ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Economics
Economics () is the social science that studies the production, distribution, and consumption of goods and services. Economics focuses on the behaviour and interactions of economic agents and how economies work. Microeconomics analyzes what's viewed as basic elements in the economy, including individual agents and markets, their interactions, and the outcomes of interactions. Individual agents may include, for example, households, firms, buyers, and sellers. Macroeconomics analyzes the economy as a system where production, consumption, saving, and investment interact, and factors affecting it: employment of the resources of labour, capital, and land, currency inflation, economic growth, and public policies that have impact on these elements. Other broad distinctions within economics include those between positive economics, describing "what is", and normative economics, advocating "what ought to be"; between economic theory and applied economics; between rational a ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Portfolio Optimization
Portfolio optimization is the process of selecting the best portfolio (asset distribution), out of the set of all portfolios being considered, according to some objective. The objective typically maximizes factors such as expected return, and minimizes costs like financial risk. Factors being considered may range from tangible (such as assets, liabilities, earnings or other fundamentals) to intangible (such as selective divestment). Modern portfolio theory Modern portfolio theory was introduced in a 1952 doctoral thesis by Harry Markowitz; see Markowitz model. It assumes that an investor wants to maximize a portfolio's expected return contingent on any given amount of risk. For portfolios that meet this criterion, known as efficient portfolios, achieving a higher expected return requires taking on more risk, so investors are faced with a trade-off between risk and expected return. This risk-expected return relationship of efficient portfolios is graphically represented by a curve ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
