How_People_Make_Economic_Decisions

How People Make Economic Decisions Kimberly Williams Eco/212 26 Apr 10 Ashok Padhi How People Make Economic Decisions The four principles of individual decision-making are trade-offs, which is when the consumer gives one something for another something. The third principle is the cost of something, which is what the consumer has to give up in order to receive something else. [What happened to the second one'] The third principle is that rational people think at the margin, which is when the decision-maker takes action if and only if the marginal benefit of the action exceeds the marginal cost. The fourth principle is that people respond to incentives, which that is when something entices a person to act upon something. A decision that I recently had to make is when I purchased another vehicle. I decided to get another vehicle because the one that I had was an older model and I was getting uncomfortable with driving it out of town. So I knew I had a budget to with and I had to make the best decision for me and my current situation. After searching around several car lots I found one where the owner was willing to work within my budget. I wanted to be able to include my taxes and plates, and insurance in my down payment. I felt like may have been pressing my luck somewhat but that was because I had a certain amount of money that I wanted to spend for everything I needed to complete the deal. I drove away from the dealership with my car, insurance, tax and tags paid and I had an extra seven hundred dollars in my pocket that I didn’t have to spend in order to get what I wanted. The principles of economics affect decision-making, interaction, and the workings of the economy as a whole because consumers have needs of some sort. The consumers decide on what things they need and then they must obtain it from another source for a price. In logical decision making, the consumer decides what item they are in need of at the time. If they go to “Store A” and sees that the cost of the item is more than they may want to pay, the consumer has the option of going to another store in order to find the item at a discount or with better options. References 9780324832945, Principles of Economics, 4e, N. Gregory Mankiw - © Cengage Learning