How People Make Economic Decisions

Economic Decisions 1

How People Make Economic Decisions

Melissa Dziedzic

University of Phoenix

ECO/212

Economic Decisions 2

How People Make Economic Decisions

Every day, people make decisions that affect our economy on multiply levels. At the end of the day, the main goal in making a decision is to get the best value. To accomplish this, there are four principles of individual decision-making: facing trade-offs, evaluating what one is giving up to achieve their goal, thinking at the margin, and responding to incentives.

The first principle in individual decision-making is facing a trade-off. The best way to describe this, is that to receive or get to their goal, they must lose something, or give something up in trade. In today’s society, generally people want to get the best value for their dollar; this is also called efficiency. As people try to get the most out of every day decisions, they must also consider equity and ensuring that the economic success of our choices is fairly circulated.

The second principle plays well off trade-offs. When an individual faces a trade-off they typically compare the costs and...