Essay on How People Make Economic Decisions

Essay on How People Make Economic Decisions

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In today’s economy, decision-making skills vary for each household; however, the bottom-line goal for every individual is to get the most for their money. In order to do this, there are 4 principles of individual decision-making: facing trade-offs, evaluating what one is giving up to obtain their goal, thinking at the margin, and responding to incentives.
The first principle in individual decision-making is facing a trade-off. In order for individuals to accomplish their goals or to obtain something they desire, there is usually something that must be given up or traded to accomplish that. In Chapter 1 Principles of Economics, efficiency vs. equity is discussed which helps further explain this principle. Society is always desiring to obtain the most for their money; getting the best they can. This is called efficiency. While trying to get the most out of our everyday decisions, we must also consider equity and making sure that the economic prosperity of our decisions is fairly distributed.
The second principle goes hand-in-hand with the first. “Because people face trade-offs, ma...

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