Analysis of Economic Decision-Making

Topics: Economics, Economic system, Planned economy Pages: 3 (828 words) Published: April 1, 2014


How People make Economic Decisions Paper
Econ/212
May 10, 2012
Rob Marsellis

How People make Economic Decisions Paper
People face tough economic decisions every day. With a declining economy, businesses must consider the four “P’s” of marketing: product, place, price, and promotion during the decision-making process. This will assist with accommodating the public’s current needs while addressing supply and demand for competitive advantage. A brief explanation addressing the principles of individual decision-making will further assist the understanding of why people make the decisions. A personal example of a decision comparing the marginal benefits with the marginal costs associated with that decision will be addressed, along with a possible incentive that may have changed the decision. A brief analysis of how economics affect decision-making will seek to determine people interaction in different economic systems. Furthermore, three economic systems referred to as market economy, centrally planned economy, and mixed economy maintains specific attributes that determine the economy’s standard of living. Principles of Individual Decision-Making

Economics studies the different happenings within markets. It also studies how people make choices or decisions in those markets. According to Hubbard and O’Brien (2010), three concepts of individual decision-making exist of how individuals interact in markets. These ideas include “people are rational, people respond to economic incentives, and optimal decisions are made at the margin,” (p. 4). A rational person refers to comparing benefits and costs. If the benefits outweigh the costs, the individual often makes a rational decision. Because people are often motive-driven, companies capitalize on the public’s motives and respond with incentives, adding an extra value to the customer. Optimal decisions made at margins consist of weighing choices that offer both benefits and costs. The choice that offers...

References: Haran, T., (2002). Market Watch. Biggest Bang for the Buck. Retrieved from
http://www.marketwatch.com/story/bang-for-the-buck-top-paying-masters-degrees
Hubbard, R., & O 'Brien, A. (2010). Economics (3rd ed.). Boston, MA: Pearson Hall.
University of Phoenix, (2011). Student Website. Economics 212 Syllabus. Retrieved from
http://ecampus.phoenix.edu/classroom/ic/cwe/PaperList.aspx
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