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Eco212 Week 2 How People Make Economic Decisions Essay

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How People Make Economic Decisions
LeoNita Bigos-Erickson
ECO 212
April 23rd, 2012
Lilliana N. Fargo Ph D.

How People Make Economic Decisions
Two important concepts that govern economics are marginal and cost. Marginal cost determines what adjustments need to be made for the rate of production. Marginal benefits are supposedly the increase that is earned when the production rate is increased or decreased based on demand.
Not only being economic conception marginal cost and benefits are common in all the production based on buyers and consumers. This is important due to the fact it plays a dual role in the decision process of consumers. The decisions production lines make has to do with demand and the benefits that are gained, always when there is an increase. To illustrate one needs to have the answer to this, or these basic questions before making a purchase are;
  1. “Will it be cheaper if I buy more than one or in large quantities?”
  2. “Will it cost less if we produce more or another style?”
  3. “How would this be to our advantage?”
(Investopedia, 2010). Normally individuals decide so they this as the basis of their reasoning.
Economics is vital for a decision process since it plays in every decision made. In each economic decision there are advantages, disadvantages, and possible risks involved. “There are four pertinent economic principles that a person contemplates when choosing something” (Mankiw, 2007).
Principle One; involves “trade-offs” in the decision making process, each person faces this practically every time they make a transaction. To get an item you want sometimes one has to sacrifice another item they deem valuable also (Mankiw, 2007).
Principle Two; regards approximately being part of the trade-off stating, “The thing is worth as much as the price of another you’ll give up for it.” This does not only submit a monetary piece of a choice it also refers to the whole cost of decisions and /or opportunity involved (Mankiw,...

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