Question #8dde8

1 Answer
Jim Vernon
Aug 16, 2015

Supply is based on seller choice and behavior.

Explanation:

Economic models generally assume that all actors seek to maximize their well-being with rational decision making at the margin. (Some advanced problems relax a few of the assuptions.) Buyers seek to maximize their satisfaction within budget constraints, and sellers seek to maximize their profit (equated with seller satisfaction) within resource constraints.

I prefer to use "buyer" and "seller" here because the same principles apply to the supply and demand for labor and capital, where firms and households have opposite roles of buyer and seller.

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