Economics Decision Making

Economics Decision-Making
Erika Escalante
University of Phoenix
Moises Rodriguez
ECO/212
January 26, 2010

Abstract
This paper will review the four principles of individual decision-making and the factors that can alter the decision in a purchase. The marginal cost, marginal benefit, and incentives are part of the decision-making process and play key roles in altering your decision.

Economics Decision-Making
      As consumers of today‚Äôs society buyers and sellers are faced with the difficult financial decisions that our economy requires us to make. Four principles of economics exist which can affect the decision-making interactions as well as the functions of the economy. I have found myself in tough situations, and have made decisions greatly influenced by the marginal benefits and costs. Although we may not always realize, it we all make economical decisions that are based on the cost of what it would take to produce more and what benefit it would have if produced (Marginal costs and benefits, 2009).
Four Principles
Economics is defined as the study of how society manages its scarce resources. The first four principles that make people use to make decisions are tradeoffs, the cost of something, margin, and the response to incentives. Decision-making requires people to trade off one goal against another. This allows the decision maker to achieve something by giving up something else. As, the decision maker the obvious and implicit costs of actions determine what they are willing to give up and as the rational decision maker the marginal benefit will exceed the marginal cost of the product that is purchased. In general consumers will respond to the change of cost or benefits (Mankiw, 2007).
Marginal Benefits
I recently went to the store to purchase a flat iron for my hair. While, taking a look at the variety of irons available I came upon two flat irons at the price of $29.99. One of the flat irons had a venting system that allowed the purchaser...