How People Make Economic Decisions

In: Business and Management

Submitted By facmom4
Words 923
Pages 4
How People Make Economic Decisions
Francisca A. Castellanos
ECO212
January 18, 2011
Evanthis (Pete) Mavrokordatos

How People Make Economic Decisions
Decisions, decisions, decisions…Decisions are the worst, and yet we must make them each and every day. The ten principles of economics explains how people make decisions, how people interact, and how the economy as a whole works. Economics is a behavioral science, which studies how societies manage their scarce resources (Hubbard-O’Brien, Glossary). Societies have different economic interactions that are affected by the type of economic system present. The main attributes of each system are as follows. In a market economy decisions of households and firms interacting in markets allocate economic resources (Glossary). In a centrally-planned economy the government decides how economic resources will be allocated (Glossary) and in a mixed economy economic decisions result from the interaction of buyers and sellers in markets but the government plays a significant role in the allocation of resources (Glossary). My small society (household) depends on me to allocate our scarce resources (monetarily), taking into account our abilities, efforts, and desires. My husband makes decisions based on our emotional needs as a family, yet both parts are equally important.
How People Make Decisions
Principle One: People face trade-offs.
Making decisions requires trading off one item for another. I face this dilemma all the time because my decisions not only affect myself but my family as well. I am constantly asking myself, “Am I making the right decision?” Since, I am the one in control of the family income learning to realize that spending an extra dollar on one good means I lose a dollar somewhere else is not always easy. Individuals are only likely to make good decisions when they understand all the options they have…...

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