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Pastimes : Austrian Economics, a lens on everyday reality
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To: gpowell who wrote (267)11/10/2003 7:42:47 PM
From: gpowell  Read Replies (1) of 445
 
Reviewing Demand.

Modeling Rational Choice:
Anything that satisfies a want or need is defined as a good. Goods include sensations such as love, pain, and pleasure. Economic agents attempt to satisfy some combination of wants and needs through the consumption of goods. Note that goods can be negative, with the property that an increase in consumption decreases the degree to which wants or needs are satisfied.

It may well be useful to imagine that a representative decision maker’s goals have been constant throughout human history and thus the choices selected are entirely dependent upon the limitations imposed by constraints.

Setting aside constraints for a moment, it’s convenient to introduce the concept of a choice state. A choice state, or consumption bundle, is a definite combination of goods that can be consumed, and any change in the constituents of the bundle, either in quality of quantity, defines another state.

An economic agent, without constraints, has available for consumption a complete set of choice states and any selection from this set indicates a preference. Thus, economic agents indicate their preference through their selection, or consumption, of specific choice states.
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