Question

What are some examples of individual economic behavior to the behavior of businesses? Compare and contrast these examples. I.E choice and scarcity, How would that effect an individual Vs a company facing choice and scarcity.

Answer 1

Individually each rational consumer maximizes utility subjected to budget constraint . So the budget constraint depicts scarcity or limited resources available while the utility maximizing consumption bundle represents choice or the best choice made using the scarce resources.

In case of business firms the scarcity is represented by the amount of inputs available or the cost minimizing bundle of inputs . Using these inputs the firm maximizes profit by selection the input ratio and output level accordingly . So the input ratio and output level is firm's choice .