Principles of Individual Decision-making
University of Phoenix
ECO/212: Principles of Economics
In every area of your life, we have to make a decision just about everything that individuals do. These types of decisions influence our daily lives and they sometimes they affect the lives of people around us. When making these decisions you will discover make factors that go into making one last one. In economics there are four rules that result how a person makes a decision (Mankiw, 2007):
• Persons face trade-offs.
• The price of something is everything you give up to get it. • Rational people think with the margin.
• People react to incentives.
These four guidelines play an essential role in economics. This kind of paper can define every person principle and after that give the target audience an insight on the personal decision of the writer using the aforementioned principles.
Making a trade-off is simply, choosing a very important factor over one more. A classic Italian quote referring to a trade-off is " you can't have got a full bottle of wine and a drunk wife”. As modern tools advances, one could argue that world has traded-off battery life in personal electronic devices for a smaller sized size and weight individuals device.
The fee is What You Give Up
When you have looked at precisely what is being traded-off, then you can identify the true benefit of your decision by what you are stopping for it. As in the previous example of personal electronic devices, giving up battery life has a serious downside in this the personal computer will have to be recharged more often, or it will be born to a wall while the unit is in employ and recharging. Here the cost can be a wonderful one to somebody who is constantly on the go.
Rational People Think with the Margin
Since Mankiw (2007) pointed out " Economists normally assume that people are rational” (p 6). Being rational ensures that an individual is going to do all that they can to...
Referrals: Mankiw, In. G. (2007). Principles of Economics. Mason, Ohio: Cengage Learning.
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