People Make Economic Decisions

How People Make Economic Decisions
Glenda Linton
August, 23,2010
Randy Weinerman

How People Make Economic Decisions
Individuals make economic decisions every day of their life.   The manner in which these decisions are made is based on three principles.   These principles are based on the some people are rational, most people respond to economic incentives and most individuals have optimal decisions that are made at the margin (Hubbard & O'Brien, 2006) .  
The first principle of the decision making is that people are rational and that they should know everything and be able to make the best decision.   People that are rational will weigh the benefits and costs of a   product before making a decision.   An example would be if an consumer wants to purchase a laptop, they would compare each brand to see which one is the best for their needs (Hubbard & O'Brien, 2006) .  
The second principle people respond to economic incentives would be if a company is willing to take the steps needed to provide what the consumer needs.   For instance, a hospital should be willing to provide the security needed for their organizations. They should be willing to have security at night when people are leaving and entering a hospital through a parking garage.   This would let the consumers know that they are protected when they need to enter the hospital (Hubbard & O'Brien, 2006) .
The third principle optimal decisions are made at the margin is when a consumer or an individual is deciding to open a business or save money for their child education.   When parents are deciding to save money for their child’s college education, they would have to make the decisions as to whether to save the money or continue to enjoy the luxuries that they might want. A consumer that is considering opening a business, would need to make the decision of is it worth it to open a restaurant in this economy and they would have to look at the competition to decide if the decision is the...