How People Make Economic Decisions
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- Category: Politics: Economics
- Date Submitted: 02/28/2010 01:48 PM
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How People Make Economic Decisions
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How People Make Economic Decisions
Throughout one’s lifetime he or she will have to make economic decisions. Four individual decision-making principles will help guide one to reach the best result. Marginal benefits and marginal costs will play a major role in assessing which decision one will choose. People have to weigh the costs and benefits in any decision that they might face and with the help of the principles of economics they can determine which decision will provide them with the better outcome.
The Four Principles of Individual Decision-Making
People make decisions based on economic principles every day. Understanding the various principles which guide one’s behaviors will allow him or her to make better use of them and make wiser choices to maximize our level of satisfaction. The four principles play a major factor in decision making.
Principle One: People Face Trade-offs
Humans understand that they cannot get everything they want due to the problem of scarcity. As such, every decision made will require humans to sacrifice an alternative and this is known as a trade-off. For example, with a certain amount of money, a child can either choose to buy a packet of candy or a new toy. Choosing either one of the choices will require the child to sacrifice the other. As such, before making a decision, one will need to be aware of the trade-offs they face and whether they feel that the decision made is worth sacrificing the alternatives.
Principle Two: The cost of something is what you give up to get it
The second principle will be that people have to costs of each decision. This will include monetary costs and also opportunity costs. For example, purchasing a car will require one to endure the cost of thousands of dollars as well of opportunity costs in the form of benefits which one could have received if the same amount of money...
Student’s Name
Course Title
DATE
Professor’s Name
How People Make Economic Decisions
Throughout one’s lifetime he or she will have to make economic decisions. Four individual decision-making principles will help guide one to reach the best result. Marginal benefits and marginal costs will play a major role in assessing which decision one will choose. People have to weigh the costs and benefits in any decision that they might face and with the help of the principles of economics they can determine which decision will provide them with the better outcome.
The Four Principles of Individual Decision-Making
People make decisions based on economic principles every day. Understanding the various principles which guide one’s behaviors will allow him or her to make better use of them and make wiser choices to maximize our level of satisfaction. The four principles play a major factor in decision making.
Principle One: People Face Trade-offs
Humans understand that they cannot get everything they want due to the problem of scarcity. As such, every decision made will require humans to sacrifice an alternative and this is known as a trade-off. For example, with a certain amount of money, a child can either choose to buy a packet of candy or a new toy. Choosing either one of the choices will require the child to sacrifice the other. As such, before making a decision, one will need to be aware of the trade-offs they face and whether they feel that the decision made is worth sacrificing the alternatives.
Principle Two: The cost of something is what you give up to get it
The second principle will be that people have to costs of each decision. This will include monetary costs and also opportunity costs. For example, purchasing a car will require one to endure the cost of thousands of dollars as well of opportunity costs in the form of benefits which one could have received if the same amount of money...