Economicals Decision

How People Make Economics Decisions Paper

ECO/212 –Instructor David Kotter

LaToy Jackson

October 3, 2010

How People Make Economic Decisions

The principal of individual decision making is the thought process in making decisions based on certain situations. There are four main principals that are used as an economic guide; evaluate your risks and don’t risk more than you can afford, more than you already have, more than you can afford to give, and follow your gut feeling. When making decisions you are choosing to follow through in your thought process and trust that the decision made is a good decision.

An example of a decision where marginal costs and marginal benefit was associated with my decision is when I worked as a staffing coordinator for a particular firm. In order to obtain a new contract with this particular client to generate more revenue for the company, we had to spend additional funds on advertising and hiring two new employees. The costs associated was over the budget, however the marginal benefit would be that in obtaining the contract the company would double the revenue.

The incentives that would have led me to make a better decision would have been more time and more funding to work with in order to advertise properly to reach out to the recruits who would best be suitable for the positions that were offered with the new contract after the company obtained it.

The principles of economics relate to decision making, interaction, and the workings of the economy as a whole because the decisions that we make are based on our economic situations presently. For example, if a family of four is living off a salary of maybe 20,000 annually and they needed to invest in transportation to be able to take care of the family; I don’t feel that it would be wise for them to rent or lease a car that cost 15,000$.

The main attributes of a market economy, planned economy, and mixed economy are that a market economy is determined by a supply and demand...