How People Make Economic Decisions
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How People Make Economic Decisions
How People Make Economic Decisions
* We use economics every day in our lives, possibly without even realizing it. The four principles of individual decision-making are tools people use to make decisions for the most mundane problems. Economics affects our interaction in society a good economy equals jobs and positions in the workforce
* Trade-off is the idea of producing more of one good or service means producing less of another. Opportunity Cost is the cost of giving up the alternative of a good or service. With margins most decisions in life are made; “at the margin.” It refers to when a person decides to do a little more of one thing while giving up a little less of another. Incentives are “devices” used to entice consumers to purchase a good or services. An example of Incentives; if a retail store is has a certain video game on sale, the game is marked down $20, but if you buy the one that is on sale plus two more that are of equal value you will get a $20 gift card free.
Without realizing it I compare marginal benefits and marginal costs every time I go shopping for groceries with my oldest daughter. She is an extremely picky eater and trying to find something she likes is always a negotiation of sorts. Take canned ravioli for an example, she always goes for the most expensive name brand, granted it is not that expensive but when you are on a budget then everything counts. I ask her if she would be willing to try something else, a lesser brand, we have had lesser brands before and she didn’t like them. We look at what the grocery store has and we decide on what to get, it is usually something in between the price range of the most expensive and the cheapest brands. By doing this we can purchase one or two more cans of ravioli that is the marginal benefit. The marginal cost is that we gave up the better brand.
An incentive that could have led me to make a different decision is a sale, by reducing the price, even...
How People Make Economic Decisions
* We use economics every day in our lives, possibly without even realizing it. The four principles of individual decision-making are tools people use to make decisions for the most mundane problems. Economics affects our interaction in society a good economy equals jobs and positions in the workforce
* Trade-off is the idea of producing more of one good or service means producing less of another. Opportunity Cost is the cost of giving up the alternative of a good or service. With margins most decisions in life are made; “at the margin.” It refers to when a person decides to do a little more of one thing while giving up a little less of another. Incentives are “devices” used to entice consumers to purchase a good or services. An example of Incentives; if a retail store is has a certain video game on sale, the game is marked down $20, but if you buy the one that is on sale plus two more that are of equal value you will get a $20 gift card free.
Without realizing it I compare marginal benefits and marginal costs every time I go shopping for groceries with my oldest daughter. She is an extremely picky eater and trying to find something she likes is always a negotiation of sorts. Take canned ravioli for an example, she always goes for the most expensive name brand, granted it is not that expensive but when you are on a budget then everything counts. I ask her if she would be willing to try something else, a lesser brand, we have had lesser brands before and she didn’t like them. We look at what the grocery store has and we decide on what to get, it is usually something in between the price range of the most expensive and the cheapest brands. By doing this we can purchase one or two more cans of ravioli that is the marginal benefit. The marginal cost is that we gave up the better brand.
An incentive that could have led me to make a different decision is a sale, by reducing the price, even...