Decisions

There are four basic principles of individual decision making because the economy affects the individuals and their behavior. First principle of individual decision making is that people face trade-offs. In other words, in order to get something one likes, one would have to give up something for another. The second principle is the comparison of the cost of something one may give up to get something else. For example, athletes and their decision to either play college sports and receive a degree, or allow to get recruited to a national team and play in the professional leagues making millions of dollars. The third principle is that rational people think at the margin. And finally the fourth principle of individual decision making is that people respond to incentives. As an example, most people would choose to purchase gasoline at a station 5 blocks further than the station they usually go to because the further one is $0.05 cheaper by the gallon.
    The third principle, rational people think at the margin, are based on the assumption that most people are rational and rational people tend to make their decisions upon comparison of marginal benefits and costs of the situation. For example, people pay ridiculous amount of money for the popular Apple products. This is because one’s “willingness to pay for any good is based on the marginal benefit that an extra unit of the good would yield.” It is not necessary to have these products, but since everyone has it and it is such a trend that not having these products will not have a negative effect on a person par say, but it might make one feel like they are left out. The most popular Apple product, the IPhone, has the marginal benefit which is so many people have the same product. Because of the benefit of having this product, this person disregards the issue of the marginal cost which basically is the out of pocket money they have to spend on something they might actually not need. For this reason, owners of this...