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Some Notes On Economic Theory, Organization Theory, And Decision Theory

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  • Widjojo Nitisastro

Abstract

Economic is interested in such questions as how much of a commodity a producer will sell at given prices, and how much a coasumer will buy at given prices. To answer these questions economists develop supply and demand functions, which in turn are derived from the theory of the firm and the theory of consumer's choice. The two most important assumptions in these two branches of economics are that the decision units in both cases are omniscient — in the sense that they are fully informed about all the available alter natives of choice and all the consequences of these alternatives — and rational, in that they possess a complete ordering of all possible set of consequences and that they always optimize their respective objective functions. More specifically, in the theory of the firm it is assumed that the entrepreneur maximizes his profits subject to the technical rules given by his production function.

Suggested Citation

  • Widjojo Nitisastro, 1962. "Some Notes On Economic Theory, Organization Theory, And Decision Theory," Economics and Finance in Indonesia, Faculty of Economics and Business, University of Indonesia, vol. 13, pages 57-64.
    • Handle: RePEc:lpe:efijnl:196204
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