Rational Choice and Market Behavior

This chapter explores the value concept that is much important to define market equilibrium and explain market behaviors in the economy. Marginal principle is used to determine supply functions in the market structure that provide rational choices in production and consumption. However, rational behaviors are criticized on its being of the underlying assumptions, in which the neoclassical theoretical models cannot justify and describe actual market behaviors. For that reason, endogeneity and exogeneity are considered in the market equilibrium model that provides a better explanation on market behaviors in reality. The chapter contributes to the theory of market equilibrium and provides a testable theoretical framework on market behaviors.