Economic Decisions

Economic Decisions

By

University of Phoenix

Abstract

The four main of individual decision-making include trade-off, people choose one item and give up the other item, opportunity cost, whatever is given up to obtain some item, marginal changes, an adjustment to a plan of action in small increments, and incentives, something that influences a choice. These principles play an important role in the economic choices individuals, small businesses, large companies, and the government make.

The four main principles of individual decision-making include trade-off, opportunity cost, marginal changes, and incentives. These principles play an important role in the economic choices people make. Individuals, small businesses, large companies and the government use these principles to make decisions that affect people on a regular basis.

Trade-off is choosing between two desirable items. People choose one item and give up the other item. An example of trade off is a person willing to exchange some family time for overtime at work. This means spending less time with family going to school events or other activities and spending more time working to earn money to buy necessary or unnecessary items.

The choice between the two desirable items is the opportunity cost. This means whatever is given up to obtain some item. Credit cards are an example of opportunity cost. A person weighs the choice between saving money and using the credit to...