...Economic Decision Making Eco/ 212 July 4, 2010 This paper will list and review the four principles of individual decision making. The listed principles are necessary tools each consumer needs in order to make the best informed decision one can regarding his or her needs. Today’s consumers are faced with a constant barrage of financial decisions that today’s economy requires we make. Most consumers today are true economist whether they know it or not. Although many may not realize it, we all make decisions based on the four principles of economics which are: the cost, the incentive, the trade-off, and the margin. Economics is the study of how a society manages the scarce resources it has. When a consumer decides to make a purchase the first principle comes into play, how much will the item cost. The second principle, at least for me, becomes what are the incentives to make the purchase. The third principle for economic decision making is what would be the trade-off for the purchase. A consumer would now begin to question what item or goal would have to be given up or set aside to gain this particular item or goal. The fourth principle is known as the margin. The benefit of an item (marginal benefit) should carry more weight than the cost of an item (marginal cost). Because the benefits should outweigh the cost, this would give the consumer the final margin. Do keep in mind opportunity as well as price, availability, upkeep, re-sale value, and the potential...
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...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 decisions” (Hubbard & O'Brien, 2010). The second principle of decision-making is that people respond to incentives. This means that people are more likely to make a certain choice if they will receive a benefit from making the choice. Last, most decisions are made at the margin. This means that most decisions are not all or nothing, but rather involve doing more on one thing and less of another. When making the decision to return to school to attain a bachelor’s degree, the marginal benefits and the marginal cost of the decision has to be considered before the final decision could be made. The marginal benefits of returning to schools were the additional income that I would be able to receive from the higher degree, the satisfaction that I would receive from achieving a degree, and the ability to find a job that used more accounting skills. The marginal cost of the decision to return to schools were the decrease in income that I would face by having less time to work, the stress of returning to school and juggling other responsibilities...
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...Decision Making in Economic Issues Economics is all about how to manage the limited resources in the society. Resources are scarce; if there could be unlimited resources then there could not be economics issues. So, the study of how society manages their scarce resources is Economics. In other word, the essence of economics is to acknowledge the reality of scarcity and then figure out how to organize society in a way that produces the most efficient use of resources. People need to take right decision in right time. So, how people make economic decisions regarding their buying goods or services at the market, are ruled by four basic principles. They are: 1. People face tradeoffs All decisions involve tradeoffs. Examples: * Going to a party the night before your midterm leaves less time for studying. * Having more money to buy stuff requires working longer hours, which leaves less time for leisure. * Protecting the environment requires resources that could otherwise be used to produce consumer goods. 2. The cost of something is what you give up to get it. * The opportunity cost of any item is whatever must be given up to obtain it (the biggest cost of one of your alternative options). * Making decisions requires comparing the costs and benefits of alternative choices. * It is the relevant cost for decision making. 3. Rational People think at the margin Systematically and purposefully they can do the best to achieve their objectives. The Rational...
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...Economic Decision Making Renice Taylor ECO/212 Monday, February 14, 2011 Anusuya Chatterjee Economic Decision Making Today, every individual must make a decision in his or her lifetime. However, every individual does not make decisions in the same manner. In economics, there are four major principles of decision-making: “people face trade-offs”, “the cost of something is what you give up to get it”, “rational people think at the margin”, and “people respond to incentives” (Ten Principles, n.d., pgs. 4-7). “People face trade-offs” is simply the concept of giving up one thing that we like for another. “The cost of something is what you give up to get it” means that cost will always be a factor. However, it should not be the only one. “Rational people think at the margin” refers to individuals thinking in shades of gray. “People respond to incentives” deals with the majority of middle-class citizens. Many individuals will hold on to their money until a sale comes along. Recently, my husband and I were in the process of deciding whether to lease a new sports utility vehicle or finance an older one. The benefits of leasing will be driving a new vehicle. There are no worries of damage done with the previous owner, accidents, etc. However, after looking at the marginal costs...
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...500B Economics for Decision-making Final Research Paper: Oil industry Forecast Background The United States is one of the largest oil reserves’ country in the world. And its proven oil reserves was 227 billion barrels, ranked 11 in the world. More than 80 percent of the country's oil reserves are concentrated in four states: Texas (24 percent), Alaska (22 percent), Louisiana State (20 percent) and California (19%). Today, the oil industry is the largest industry in the world and accounts for over $3 trillion dollars in annual sales. Between 1950 and 1973 the world oil industry grew 9-fold – a rate of increase of 10% per year, sustained over a period of 20 years. During that time period, the world produced over 2.5 billion new motor vehicles, half of which in the United States. The five largest producers of oil are Saudi Arabia (10.37 mbd), Russia (9.27), United States (8.69), Iran (4.09) and Mexico (3.86). And now, International instability and rising demand have severely impacted prices, which reached an all-time high of over $70 per barrel earlier this year. Both domestic and foreign oil producers are relishing in high prices by posting record profits. The growing trade imbalance in favor of oil producing nations jeopardizes American long-term economic health. The current level of US national debt – $8.3 trillion – coupled with the Iraq War places the US in an extremely vulnerable position. Finally, unmentioned as of yet, is the rising threat of global warming...
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...Topic: “Elasticity of Demand and Managerial Decision Making” The demand of a commodity depends on the size of the total market or industry demand for the commodity which in turn is the sum of demands for the commodity of the individual consumers in the market. The demand for a commodity arises from the consumers’ willingness and ability to purchase the commodity. Consumer Demand Theory postulates that the quantity demanded of a commodity is a function of the price of the commodity, the consumers’ income, the price of the complementary and substitute commodities and the taste of the consumer. It is also expressed as: Qdx=f(Px, I, Py, T) Where Qdx = Quantity demanded of the commodity X by an individual per time period Px = Price per unity of commodity Y I = Consumer income Py = Price of substitute or complementary commodity T = Consumer taste When the firm increases the price of a commodity, sales generally decline. A manager expects an inverse relationship between the quantity demanded of a commodity and its price. On the other hand, when a consumer’s income rises, he/ she usually purchases more of most commodities, known as normal goods. There are some goods and services, however, which the consumer purchases less as income increases, which are termed as inferior goods. The inverse relationship between the price and the quantity demanded of the commodity per time period is the individual’s demand schedule for the commodity, and the plot of data gives...
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...In week four, the innovative firm, Quasar, is introduced in the market structures simulation. Quasar is leading the way in the computer industry with the design and manufacturing of an all optical notebook computer. Through the market structures simulation, examples on how decision-making differ among the market structures of monopoly, oligopoly, monopolistic competition, and perfect competition. This simulation and the real-life scenarios detailed within, provide insight and understanding to the intricate decisions that are made in each type of market structure and the impact of those decisions. In the Quasar simulation, the C.E.O. utilized pricing as tool for optimizing profits, and with the input from the board of advisors decided to allocate funds to advertising, technology, and other ventures. (University of Phoenix, 2008) Through the course of this paper, a solution will be created using strategic variables, in order to sustain the economic profits that the firm can earn. This paper will also look to identify pricing and non-pricing strategies that will further facilitate the goal of maintaining economic profits. Finally, this paper will ascertain what kind of innovations will best prolong Quasar’s distinctiveness. In 2003, Quasar launched the world’s first all optical notebook computer branded Neutron. Because of Neutron’s processor, memory use and high-speed optical conductors, Neutron boasts approximately 5 times the speed of existing microchip-based computers. Neutron...
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...Effects of Economic Uncertainty on Business Decision Making Market uncertainty has never been higher. Business observers, CEO’s and policymakers have repeatedly raised concerns about the uncertainty of doing business during the ongoing financial and economic crisis of 2007. No one is sure whether or not people who do business with Uncle Sam will be left out in the cold. This kind of uncertainty can play havoc with business and with the economy at large. The Patient Protection and Affordable Care Act (PPACA), widely recognized as Obamacare, was signed into law by President Barack Obama in March 2010. It is intended to decrease the number of uninsured Americans and lower the overall cost of health care in the U.S. Most business owners are concerned about the program’s potentially harmful effects on the cost of employee health care coverage. Charlie McCrudden, vice president of government relations for the Air Conditioning Contractors of America, said “There’s a lot of uncertainty about what contractors will do about providing health care for their employees…” (Anesi). As uncertainty continues to grow in the markets, so do the changes in employment practices. During challenging economic times, many businesses are opting to hire temporary and contract workers as opposed to full time employees. Not only does this hiring practice affect employment rates and the economy as a whole, but is also affects those seeking work and financial stability. Uncertainty and ambiguity...
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...Introduction This review paper shines a light on how vital the use of economic tools is in making managerial decisions as reflected in the simulation. Decision making process of management is described in different market structures. Just as it pertains to any for-profit business organization, the goal is to cut and maximize profits in each type of market structure. Based on the information provided in the simulation, Quasar Computers were involved in an extensive research in developing a pioneer product “the Optical Notebook.” In 2003, the company launched the first all-optical notebook computer and branded it the “Neutron”. This product is described as an energy saving optical technology with its rechargeable batteries capable of lasting up to three days; hence, transcending it into a leading technological product in its unique class. With the assistance of senior executives in the company, the decisions on operational and business strategies relative to a variety of market conditions are taken and discussed. Monopoly Quasar emerged as the only player in the market for its unique optical notebook computer; therefore, establishing a monopoly market structure. Within this monopolist market structure, maximizing profit tends to occur at the point where marginal cost equals marginal revenue based on the result shown by toggling the demand curve. In the initial scenario, it was presented that Quasar had the patent rights on all-optical technology for three years from the launch...
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...Economics through Decision LaFaye P. Moore Jr. ECO/212 Principles of Economics October 12, 2011 Robert Vansant Economics through Decision Decision-making are the process in how to make economics decision. Through economics comes decisive ways in making consult decision. This will show making individual decision in how a person uses economics to their lives. Economics effect every decision that someone make in the world. Example to the principles of individual decision-making Individual decisions have principles in how to make decision. Can someone just make on individual decision that does not affect him or her on economics decision. The principles for individual decision-making are to make your own decision. Individual decision-making personal or business decision because a person can make it for reason. Example if a person is makes a decision at home for their family then that come to the person decision-making. Then on the twist side, the business individual decision-making would be to change the business face. Changing the face of the company by figuring out how changing this will benefit the business. Decision in which compared the marginal benefits and the marginal costs associated with the decision What decision that a person make with marginal benefits and the marginal costs. Benefits and cost marginal are affecting decision-making. The process that takes these two marginal, which helps someone, make a decision that affect his or her choices in the economics...
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...MAT 540 Week 2: Decision Analysis |Slide # |Topic |Narration | |1 |Introduction |Welcome to Quantitative Methods. In this lesson, we will discuss the concept of decision | | | |analysis, a valuable technique for decision making process. | | | | | | | |Please go to next slide. | |2 |Objectives |When you complete this lesson, you will be able to: | | | |Analyze decision-making problems electronically. | | | | | | | |To meet this outcome we will cover the following supporting topics: | | | |Components of decision making; | | | |Decision making without probabilities; ...
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...Running head: HOW PEOPLE MAKE ECONOMIC DECISIONS How People Make Economic Decisions Abstract People make decisions every day based on day-to-day activities but what actualy drives the individual decision-making process. Tradeoffs, opportunity cost, margins, and incentives are the four principles of individual decision making process. The following paragraphs each of the four principles of the decision-making process. This paper also explains how the principles of economics affect decision-making, interaction, and the economy. Organizational Trends The four principles of decision-making are tradeoffs, opportunity costs, margins, and incentives. A tradeoff is the sacrificing of an item to gain something of greater value to an individual. Opportunity cost is what an individual give up to gain the new item, for example some students sacrifice their weekends or free time to gain a college degree. Margins is the next principle, margins are small changes to a plan of action. The last principle of individual decision-making is incentives. Incentives are anything that encourages or promotes a change in person’s behavior (Bauman, 2002, p.1-5). People make decisions everyday in which they compare the marginal benefits to the marginal cost. A few years ago the price of fuel reached a record high. These fuel prices caused consumers to stop purchasing gas guzzling SUVs and owners were even trading them in for environmentally friendly hybrids. Consumers also relocated...
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...How People Make Economic Decisions Paper Agnes Pierre Louis ECO/212 October 5, 2010 Nick Bergan How People Make Economic Decisions Paper The decision we make everyday always comes with some kind of risk. By making these decisions on a daily basis we have to realize that they are four major principles in the economic world. These four major principles are: (1.) never risk more than you can afford to give; this is when you can offer to give your time, energy, and work under your terms. For example; you should take only a job that will require a lot of research if you are willing to be a good reader and listener. (2.) Never risk more than you have; this is when you become limited in what you can do. For example; you need to know how much you have and never lessen your resources. (3.) Never risk than you can get in return. For example; make sure the risk you take always have gain for you. (4) Follow your intuition. Finally, when making those decisions firmly knows that you are committed to trust and go by that decision you chose because it was a good decision to open up future possibilities. The example the decision in which I compared the marginal benefits and the cost associated with that decision was that I had a client where I charged him/her a price of my consulting service. I explained into details the types of service I offer, however; they wanted more than what my service offered. These services they wanted were in jurisdiction but I couldn’t...
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...How People Make Economic Decisions People select different alternatives in order to achieve their objectives. They choose one way or another because of scarce resources. This means that individuals may have lots of wants or needs, but they are limited by the available resources; be them money, time or several other. In this paper I will list three economic ideas associated to individual choices, present two cases of decision-making in which I shall compare the marginal benefits and the marginal costs related with the decision, show what incentives could guide to take a different path, and explain how the principles of economics affect decision-making, interaction, and the gear of the economy as an overall. Individual Decisions R. Glenn Hubbard and Anthony Patrick O’Brien (2010) teaches that “economics is the study of the choices consumers, business managers, and government officials make to attain their goals, given their scarce resources” (pg.4, para 3). Previous citation can translate as: I have only an hour time and I need to choose if to finish my economics paper, or watch my favorite show. Another individual decision example may be when a business has to decide if to produce 5,000 more electric batteries for cars, in the middle of the year, or to stay with the 50,000 production number that was the first decision in the beginning of the year. There are three main economic ideas related to individual choices: “people are rational, people respond to incentives, and optimal...
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