Analysis of Economic Decision-Making
Rob Marseilles People face tough economic decisions every day. With a declining economy, businesses must consider the four “AS” of marketing: product, place, price, and promotion during the decision-making process. This will assist with accommodating the publics 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 arsenal 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
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Because people are often motive-driven, impasses capitalize on the publics 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 the highest benefit with the least cost is a marginal decision. Personal Example off Marginal Decision A personal example of a marginal decision includes continuing my education and attending the University of Arkansas for a master’s degree in business administration.
Marginal benefits consist of higher salary, increased opportunities, ND stronger feeling of self-accomplishment. According to Harlan, (2002), in 1999 women earned 32% more a year with a master’s degree than with a bachelor’s degree. A few marginal costs include increase debt, lack of current salary, and lack of time needed for extensive studies. The marginal costs prove as a short-term hindrance. Harlan, ( 2), displays almost a $ask deterrence annually between the two degrees, thus concluding the benefits outweigh the costs.
An incentive that may have altered this decision may include obtaining a position of title with a hefty imposition package. Principles of Economics Economics analyzes how people make decisions, interact with others, and how the environment affects these decisions and the interactions. Most people base decisions on potential benefits. Benefits may surface in many ways. Some may view benefits as what one can do for another whereas others view benefits as “what is in it for me. ” Either way the people view the benefits, negotiations must take place. These negotiations are considered interactions within markets.
The environment affects hose interactions through supply and demand, scarce and plentiful resources, and quality and costs. The present economy suffers with lack of Jobs, income, resources, and options. When the economy is low, interactions between people often become hostile. Because of the scarcity of employment, people often project the mannerism of “every man for himself. ” This may create more concerning issues for the social environment. Economic Systems Market economy, centrally planned economy, and mixed economy remain the three divisions economists categorize economies.
In a market economy, interactions between people and markets decide how resources are spent while in a centrally planned economy, the government decides this. A main attribute of a market economy includes prosperity. Because of competitive advantage, companies continually provide quality goods and services at lower rates. This allows companies to prosper, increasing the standard of living. Contrary to the market economy, a centrally planned economy often results in a lower standard of living. The government limits the spending of resources, thus, limiting the higher quality of reduce for lower costs.
A mixed economy; however, refers to a combination of a market and centrally planned economy. Although people and markets determine the allocation of resources, the government maintains a significant influence. Conclusion In conclusion, people make decisions based on three ideas; rationality, whether the decision offers incentive, and making a decision based on margin. The study of economics analyzes the happenings in different markets and how people interact within those markets. A personal example provided an understanding of a marginal cession comparing the benefits and costs of the decision.