Concise Essay

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Recommended: Importance of economics in daily life

The study of economics relates to how people and society as a whole, allocate resources in order to achieve goals. There is no doubt that economics is a very important key in understanding many different concepts, such as markets and individual consumption decisions. However, there are limitations to the application of economics and economic theories in reality; these include the value of utility, ceteris paribus, perfect information, profit maximization and the assumption of rationality, which I will be discussing in this essay.
Utility is an extremely difficult item to measure across a large group of people, as it only exists psychologically from person to person, there are also many different variables which will be held constant in certain diagrams which will affect the utility from an item, for example a group may prefer item A to B, but it will be almost impossible to calculate exactly how much they prefer item A to B. This is a major limitation to utility theory, as it uses hypothetical figures which cannot be accurately translated into absolute values, which makes it extremel...

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