How People Make Economic Decisions Paper
“The word economy comes from the Greek word oikonomos, which means, one who manages a household.”(2007, Chapter 1) I have been married for three years now and I never know before then how much time and energy it takes to run a house. Someone needs to make sure that the rent is paid on time, there is cash available incase of in emergency. After my wife and got mired we had to set down and talk about our finances and our notes. For example, my wife had purchased new cars before we got married. If she would to lose her job I would be the person responsible on making the payments. A lot of decisions needed to be made in order for our household economy would be able to function.
The four principles of individual decision-making are.
1. People Face ...view middle of the document...
” (2007, Chapter 1) For example, if a collage athlete’s dream is to become a pro in his or her sport they need to perform at a high level, so the recruiters or sponsor will take notices and hire them. They spent a lot of time working out and training. If the athletes would get heart and cannot recover, the time that they spent they could have taken other class or graduated earlier.
3. Rational people think at the margin – “People who systematically and purposefully do the best they can to achieve their objectives.” (2007, Chapter 1) When a decision has been made, and in the middle of the task and a small change was made that would make production better and the cost stays the same or better.
4. People respond to incentives – “Because people make decisions by comparing cost and benefits, they respond to incentives” For example, when we go to the store and we see a soda brand on sell, buy two get one free for the same price as the competitors soda price we would tend to go with the free soda, the incentive it the free soda.
Now that I am married with an eight month old I have made a decision that made me compare the marginal benefits to the marginal cost. I have been a season ticket holder for six years for the USC football games. The price for a pair of the tickets is $704.00 for six games. That $58.00 a ticket, I would not be able to attend all the game so I had to sell them individually. I would try to sell them twice the cost of the tickets so I can make a small profit, but if the tickets did not sell I would be stock with the tickets. So some times I would have to sell them bellow that price of the tickets.
Principles of Economics, (4th ed.). Author Mankiw, Gregory, N. (2007).