Question

Who and what are the four economic decision-makers/actors and what do they attempt to maximize? Give real-life examples of the four economic decision-markers/actors and dicuss how they attempt to maximinze.

Answer 1

1. Consumer - Maximises consumption subject to the income constraint. Eg., you want to buy a house, you will buy the one which gives you maximum satisfaction.
2. producer - Maximise profit or sales subject to input constraint and minimizes cost as well. Eg, You will hire labor as much as you want to maximize production.
3. Government - Maximize social welfare through fiscal policy. Eg, In case of recession, the expansionary fiscal policy is used where public expenditure is increased.
4. Rest of the world - Maximises trade of goods and services. Eg, Exporters and Importers put demand and set price of any product in the market.