Thinking rationally

I am happy to see that the EdExcel specification puts the neo-classical assumption that men is rational to question. My textbook mentions three reasons why men may not behave rational: social norms, habits, and weak computational skills. It does not cover that people may not end up with a rational decision because of empathetic considerations.

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Subsidies

In this post, I focus on subsidies. The author of my textbook uses the model of supply and demand to analyse the effect of a subsidy on both supply and demand. He takes the perspective of a subsidy that falls to the supplier. But not all subsidies fall to suppliers, subsidies like housing benefit or subsidy on solar panels fall to buyers. I wondered if an analysis from the perspective of the buyer would give another result, all other things equal.

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Price war or advertising collaboration?

One of the things I like about my textbook, is that it treats advertising as a separate influence on demand. In Dutch textbooks this is often raked up with other influences on taste. The author of my textbook even takes it one step further, by pointing out, in the chapter on price elasticity, that, in theory, you could calculate elasticity for anything that influences demand. So, I figured, this includes advertising. Therefore I did some research on advertising elasticity.

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