How People Make Economic Decisions Essay

937 words - 4 pages

How People Make Economic Decisions
Francisca A. Castellanos
ECO212
January 18, 2011
Evanthis (Pete) Mavrokordatos

How People Make Economic Decisions
Decisions, decisions, decisions…Decisions are the worst, and yet we must make them each and every day. The ten principles of economics explains how people make decisions, how people interact, and how the economy as a whole works. Economics is a behavioral science, which studies how societies manage their scarce resources (Hubbard-O’Brien, Glossary). Societies have different economic interactions that are affected by the type of economic system present. The main attributes of each system are as follows. In a market economy decisions of ...view middle of the document...

Most of the time I take the first option available to me even if I know it may not be the best one.
Principle Two: The cost of something is what you give up to get it.
Costs and benefits are alternative courses of action and opportunity costs are the things one must look at when making decisions because opportunity costs are whatever one gives up to obtain something else (Tomlinson Reviews).
Principle Three: Rational people think at the margin.
I always felt I was a rational person until I began this course. Rational people systematically and purposefully do the best they can to achieve their goals (Tomlinson Reviews). Rational people often make decisions by comparing marginal benefits to marginal costs. A marginal benefit is the additional benefit to a consumer from consuming one more unit of a good or service (Glossary). A marginal cost is the additional cost to a firm of producing one more unit of a good or service (Glossary). A rational decision maker takes an action if and only if the marginal benefit of the action exceeds the marginal cost (Mankiw, pg. 4). I feel I am the complete opposite of this definition. I rule my decisions with my heart not my head and this tends to lead down a path of great regret. Can you say, “Impulse shopper”, “Buyer’s remorse” these are only a few terms to describe the way in which I tend to make decisions.
Principle Four: People respond to incentives.
This is definitely one of the ways in which I make decisions. Incentives induce people to act. Sales tend to drive me to buy even when I may not need the product. The influence of prices on the behavior of consumers and producers is crucial for how a market economy allocates scarce resources. If the policy changes incentives; it will cause people to alter their behavior (Mankiw, pg. 5).
An example of a decision I made in...

Other Papers Like How People Make Economic Decisions

How People Make Economic Decisions Essay

777 words - 4 pages How People Make Economic Decisions Brittany Hansen June 2011 Mr. Krupka How People Make Economic Decisions From the time a person starts working to pay bills or buy products they are forced into making decisions that will affect their bank account. There are four different principles that play into the decision-making process. While these decisions will affect marginal benefits and costs, there are incentives for the choice as well. The

How People Make Economic Decisions Essay

558 words - 3 pages How People Make Economic Decisions Erik Hofemeister Eco/212 01/14/2012 Zachary Smith In economics, there are four principles of individual decision-making. These principles confront people from all walks of life, regardless of wealth and status. They are known as individuals confronting trade-offs, the expense of something is what you surrender to obtain it, intellectual individuals think at the margin, and individuals react to

How People Make Economic Decisions

525 words - 3 pages Four principles of individual decision making are, 1) People Face Trade-offs, Getting one thing that we like and giving up something we like. 2) The Cost of Something Is What You go to college you’ll have a better life and career, but how much will it cost for you to go? 3) Rational People Think at the Margin. Doing the best they can to achieve their goals, given the opportunities they have. 4) People Respond to Incentives or punishment or a

How to Make People Like You

828 words - 4 pages How to make people like you? So you want to know how to make people like you? It's easier than you think. Here are six research-backed tips: 1. Encourage people to talk about themselves It gives their brain as much pleasure as food or money: Talking about ourselves — whether in a personal conversation or through social media sites like Facebook and Twitter — triggers the same sensation of pleasure in the brain as food or money

"Let People Decide Their Own Fate: Free Market Bioethics" Discusses The Benefits Of Allowing People (Not Government) To Make Their Own Decisions Regarding Cloning And Bioengineering

920 words - 4 pages The issue of biotechnology is one of the most fiercely debated of all current issues. Bioethics is complex because both sides have such strong arguments. On one hand biotechnology is the Holy Grail for millions of people, offering cures for illnesses and disabilities thought to be incurable. On the other side of the argument, a society of lifeless clones and three eyed babies are seen as possible side effects of fooling with Mother Nature. Both

Making Economic Decisions

617 words - 3 pages Making Economic Decisions Econ/212 Making Economic Decisions Individuals make decisions based on three principles. To understand the decision-making principles individuals must first realize that people have limited resources and unlimited wants. Because individuals face scarcity, the first economic principle is that people are rational. The principle of rationality means, “Individuals and firms use all information available to making

Analyzing Managerial Decision in an Organization

1015 words - 5 pages Analyzing Managerial Decision in an Organization In every organization, the aim and objectives of organizational manager is to be able to make effective and efficient decisions that aid in turning the organization around. They tend to develop a strategy that promotes economic growth and discourages competition. Organizational shareholders need to understand how a shift in demand and supply can affect organizational productivity and price

Compare a Necessity and Commodity Product, Identifying the Availability of Sbstitutions for Coffe

758 words - 4 pages How People Make Economic Decisions Juan D. Agramonte ECO/212 Principles of Economics August 4, 2010 Instructor: Robert Waremburg How People Make Economic Decisions Marginal costs and benefits are two important concepts that govern economics. Marginal cost is important in determining the need to adjust the rate of production. Whereas, marginal benefits are considered as the gain that will be earned if the rate of production will be

Economic Decisions Paper

706 words - 3 pages How People Make Economic Decisions Paper Eco/212 September 28, 2010 Making Economic Decisions Economic decisions made by individuals can affect the economy. The principles of individual decision-making include people being rational, economic incentives, and optimal decisions made at the margin. Trading the three economic systems are market economy, centrally planned economy, and mixed economy. Each contains their own attributes on how

Behavioral Economics

610 words - 3 pages Introduction Behavioral economics studies cognitive, emotional and social factors effects on economic decisions made by an individuals and consequences returns, resource allocation and market prices. It assumes that human beings are rational in the decisions they make. Behavioral economics do not involve assumption. The difference comes in from the notion that the human behavior observation contradicts behavior of people to be perfectly

Mangerial Decisions

659 words - 3 pages ). Incremental analysis is an approach used to make economic decisions. After reviewing two or more situations, the more cost saving opportunities is chosen. Although, it is more widely used in business, incremental analysis can be used to assist in personal buying decisions also. Many people still recovering from the economic downturn are hunting for the best deal. However, driving two miles to save a few pennies may not be the best choice considering

Related Essays

How People Make Economic Decisions Essay 539 Words

539 words - 3 pages How People Make Economic Decisions Charea Smith ECO 212 November 21, 2010 Les Hurley There are three ways people make economic decisions. First there are those that make these decisions rationally or face the tradeoff. They weigh the benefits against the cost. What is being gained as opposed to what is being given up. An example would be the cost of buying a new vacuum from Wal-Mart or Sears. Which one will give the most benefit for the

How People Make Economic Decisions Essay 827 Words

827 words - 4 pages How People Make Decisions GUILLERMO AVILA UNIVERITY OF PHOENIX How People Make Economic Decisions The word economy comes from the Greek word for “one who manages a household” and this concept itself involves decision-making. Such decisions are framed by activities related to people’s behavior in a society facing constant changes in response to incentives, making decisions pursuing different goals with

How People Make Economic Decisions Essay 680 Words

680 words - 3 pages How People Make Economic Decisions Paper ECO/219 May 3, 2010 How People Make Economic Decisions How people make economic decisions start by using four basic individual decision-making principles. An economy is just a group of people interacting with one another as they go through their lives. The four principles are as follows: people face trade-offs, the cost of something is what you give up to get it, rational people think at

How People Make Economic Decisions Essay 617 Words

617 words - 3 pages How People Make Economic Decisions Jeness D Weninger ECO/212 18 October 2010 Luis Bernardo Torres Ruiz Every day, people are faced with economic situations requiring a decision to be made, whether knowingly or subconsciously. It may be something as simple as deciding between going to the movies versus renting a DVD, or as complex as calculating how much of a product or even what type of product to produce. According to Ten Principles