Economic_Decisions

Some people find it hard to make good economic decisions. When making these types of decisions most people apply consciously and unconsciously principles as they make economic decisions. To further support the role of economics on decision making the paper will include examples of how decisions affect the marginal cost and benefits. Another interesting fact about economic decision is how incentives play a role in a person’s thought. Incentives are also seen as a powerful influence on the decisions of the people. Lastly this paper will look at the relationship of simple decision making compared to the economic system and we look at the economy worldwide. People make economic decision based on their principles. The first important principle we all must remember is that with every decision there is a risk. With that being said the decisions that are made is based on how manageable the risks can be. Every person has different judgements and limitations so making decisions would only be determined if he/she could handle the consequences. Another principle that is beneficial when making economic decisions is matching the resources with the risk. This principle works with principle one. With the first principle a person must look at different resources that are available and decide if the decision made is sustainable enough to assess whether or not the decision that is made is relevant with the presence of the risk. But not checking the resources available when making economic decisions may result in losing all resources. Another important factor when making economic decision is considering the profits that may be earned from a risk. If there is no profit then the risk does not make sense to pursue. With decision making no matter what a person must decide gut feeling always come into effect. Marginal benefits and marginal cost can vary from decision to decision. One example is how a person will spend their time after work. One option could be choosing between exercising and spending extra hours at home completing more work. Even though this situation can be very simply the marginal benefit and marginal cost can be highly evident. If he/she decides to attend exercise classes then this will cost them money. If he/she decides to spend extra time at home working the marginal benefit may be more attractive. With incentives people are more egger to make an economical decision. Staying with the above example he/she may look at the decision and see if one decision would have a better incentive. With each decision both have their own incentive but it boils down to which is more attractive to the person. The decision of working at home will show how dedicated the person is and may gain recognition. Taking exercise classes will benefit the body. So both decisions have incentives. The economic system is made of three systems; the planned economy, mixed economy, and market economy. The planned economy is where the government can take control on fixed prices. The mixed economy is a mix of the planned economy and market economy. The market economy is the system that determines the prices of goods. With these systems there is a sense of balance. In today’s economy more countries are leading more on mixed economies as it is more beneficial for all.