How People Make Economics Decisions

Written on December 20, 2016   By   in Uncategorized

How People Make Economics Decisions
University of Phoenix
Principles of Economics
ECO/212How People Make Economic Decisions
According to Mankiw, the four most important principles of individual decision-making are: ???People Respond to Incentives, The Cost of Something Is What You Give Up to Get It, Rational People Think at the Margin, and People Face Trade-offs:???
?  ?  ?  People face trade-offs by having to give up something to get what they want or need. ?  This is no surprise for most people who learn early in life that few things are free. As an example of a trade-off, many times students from college give up spending time with their families in order to complete their homework and accomplish their goals of earning a Bachelor or Masters Degree. ?  Because of the ???trade-offs, making decisions require comparing the costs and benefits of alternative courses of action??? (Mankiw).
?  ?  ?  Next, rational people think ahead of time and on the spot. A rational decision maker ???takes an action if and only if the marginal benefit of the action exceeds the marginal cost??? (Mankiw). ?  An example of a decision comparing the marginal benefit and the marginal cost associated with that decision occurred when I decided to pay ahead of time a nice and descent condo in Puerto Penasco, Mexico, so my family and me could go on vacation. I had to choices and one of them was to get it ahead of time or to pay when we went on our vacation. ?  The marginal benefits of the cost of the condo were different in the way that the cost was a big difference. ?  Therefore, I based my decision on these personal incentives and started to save money even though my trip was going to be in a couple of months.
?  ?  ?  Of course, if the condo fee had been significantly higher than traveling by air, I would have more vacation time at work and more time with my family. I would have chosen to travel by air to reduce the cost of my trip especially on gas.?  ?  ?  Finally, the principles of economics is affect by interaction, the workings of the economy and decision-making, as a whole because all people make decisions based on what they want and what is best for them personally. Reference
??? “Principles of Economics”; N. Gregory Mankiw; 2003
??? Slembecks Principles of Economics

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