Economic Decisions

Economic Decisions

Economic Decisions
xxxxxxx
University of Phoenix
Instructor xxxxx
May 8, 2009
Economic Decisions
      The four principles of individual decision making are based on our natural habits and behaviors as human beings. These principals are the concept of trade-offs, the idea that the cost of something is what you give up to get something, the concept that the average rational person thinks within margins, and fact that most people respond to incentives. These principles explain how we as a society operate on an economic and social level. One action affects another and all actions and processes are interrelated and tied together.
      Trade offs are what we give up to get something. Most of us work, giving up our time, energy, and efforts in exchange for paychecks. Our daily lives are full of tradeoffs. Tradeoffs mirror the law of the marketplace which is supply and demand. Our lives are governed by tradeoffs and we try to find equilibrium between what we tradeoff and what we gain that is satisfactory to us. In the same sense, the marketplace as a whole has to find equilibrium between what is supplied and what is demanded.
      In our society, the amount we sacrifice for a certain thing is reflective of its value. Different people and different societies place different amounts of value on things. For example, in Africa where sizeable amounts of the world’s diamonds are mined, diamonds had little or no value to the natives there. However, because of its claimed scarcity, the Western World placed a very high value on diamonds.
      The economy works as a whole and the individuals within these economies normally work motivated by reason and cause. There are several factors that can determine one’s rational thinking but rational thinking buy all individuals in society are based within margins. Every individuals margins are different based on their individual circumstances but nevertheless, their decisions are based on the margins they are given. And most...