Economic Decision Making Essay example - 563 Words

Individuals make economic decision based on a variety of reasons. The rational is based on each individual’s need or desire for a commodity. People go through several decision-making processes before making the final decision and are often not conscious of the process. Obviously, decision- making covers a wide area, involving virtually the whole of human action. Often people are not conscious of the process. The four principles of individual decision- making suggest that people face trade off. People have to give up a thing to acquire some other thing. This includes money, time, resources, and energy. The cost of something is what a person is willing to give up to obtain it. Therefore, the need is to find an alternative and then†¦show more content†¦The decision is then based on whether the benefits exceed the cost. Incentives whether they are positive or negative are a part of the decision-making process. Incentives are motivators that cause change. The cost of tomatoes, for instance, the price of tomatoes rose to $2.79 per pound. The effect was that people purchased fewer tomatoes and thus, people look for an alternative product or just did not purchase them. As a result of this, the price of tomatoes increased even more because people were purchasing fewer tomatoes. From the producers’ side, the product was going to waste and profits were declining. The marg inal cost was affected, causing them, the producer to lower the cost to obtain a higher marginal benefit. In using this example, two types of incentives could have led to making a different decision. 1. Financial incentives such as a product coupon, a store discount, or a sale. 2. Moral incentives such as a special meal for a special occasion that called for the need to use tomatoes in the favorite dish for a loved one. The principles of economics affect all aspects of life to involving consumers, companies, and government’s interaction with each other. It uses equations, formulas, theories and details to analyze the decision- making process, and it generates awareness. Trade can allow a person to concentrate in his or her area of expertise. When trading those goods or services with others, a gateway to other products orShow MoreRelatedBehavioral Economics And Its Effect On Consumer Decision Making2050 Words   |  9 PagesAbstract This paper will cover the study of behavioral economics and its effect in consumer decision-making. The impact of human factors, importance of making rational decisions, and how all this ties into the economic market will be discussed in the report. This paper will include models, tables, and real world examples of a decision making process as it relates to behavioral economics and consumer buying process. The usefulness of the utility theory will be illustrated as an example pertainingRead MoreDecision Making in Economic Analysis1160 Words   |  5 PagesAn explanation of how decision-making is dealt with in economic analysis requires an examination of the main factors at play. These factors amongst others are looked at as a base for decision making. Supply and Demand are the most fundamental tools used in economic analysis. I will explain what demand is and how the demand curve is derived. I will also write about Supply and its relationship with Demand. I will examine equilibrium price (market clearing price) and how we can calculate or plot itRead MoreEconomic decision making Essay4071 Words   |  17 PagesFORESTRY INDUSTRY STATE ANALYSIS. EXECUTIVE SUMMARY Tasmania is Australia’s most forested state, where it has one of the highest forest proportions on Earth. 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