...Economic Decision Making Eco/ 212 July 4, 2010 This paper will list and review the four principles of individual decision making. The listed principles are necessary tools each consumer needs in order to make the best informed decision one can regarding his or her needs. Today’s consumers are faced with a constant barrage of financial decisions that today’s economy requires we make. Most consumers today are true economist whether they know it or not. Although many may not realize it, we all make decisions based on the four principles of economics which are: the cost, the incentive, the trade-off, and the margin. Economics is the study of how a society manages the scarce resources it has. When a consumer decides to make a purchase the first principle comes into play, how much will the item cost. The second principle, at least for me, becomes what are the incentives to make the purchase. The third principle for economic decision making is what would be the trade-off for the purchase. A consumer would now begin to question what item or goal would have to be given up or set aside to gain this particular item or goal. The fourth principle is known as the margin. The benefit of an item (marginal benefit) should carry more weight than the cost of an item (marginal cost). Because the benefits should outweigh the cost, this would give the consumer the final margin. Do keep in mind opportunity as well as price, availability, upkeep, re-sale value, and the potential...
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...Economics Decision-Making Process Name Institution Economics Decision- Making Process According to (Anderson & Sweeney, 2000) managers and economists use the decision-making process to analyze economic models. Decision-making process involves selection of the best alternative from many choices. It involves setting goals to make decisions, assessing alternative occupations and gathering information. When analyzing economic models, managers and economists note that there are fundamental assumptions that every model relies on to remain valid. These assumptions are present in all decision circumstances. Everyone in the society, from the small business owner to the billionaire investing in the real estate to the teenager applying a job makes some economic decisions at some point. The basic assumptions are surrounding decision-making process always apply. The primary factors surrounding economic decision making include; maximizing value, working on a budget, cost benefits analysis and rational decision making. The process of making economic decisions is complex as that of consumer decision making. When making decisions, businesses derive most of the critical choices from macroeconomics data, any of the choice made could mean the failure or success of their enterprise. The accuracy, reliability and validity of the information the business uses are of great importance (Tremmel, 2008). My aim in this paper, therefore, is to discuss and identify any decision-making processes...
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...Making Economic Decisions Econ/212 Making Economic Decisions Individuals make decisions based on three principles. To understand the decision-making principles individuals must first realize that people have limited resources and unlimited wants. Because individuals face scarcity, the first economic principle is that people are rational. The principle of rationality means, “Individuals and firms use all information available to making decisions” (Hubbard & O'Brien, 2010). The second principle of decision-making is that people respond to incentives. This means that people are more likely to make a certain choice if they will receive a benefit from making the choice. Last, most decisions are made at the margin. This means that most decisions are not all or nothing, but rather involve doing more on one thing and less of another. When making the decision to return to school to attain a bachelor’s degree, the marginal benefits and the marginal cost of the decision has to be considered before the final decision could be made. The marginal benefits of returning to schools were the additional income that I would be able to receive from the higher degree, the satisfaction that I would receive from achieving a degree, and the ability to find a job that used more accounting skills. The marginal cost of the decision to return to schools were the decrease in income that I would face by having less time to work, the stress of returning to school and juggling other responsibilities...
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...Decision Making in Economic Issues Economics is all about how to manage the limited resources in the society. Resources are scarce; if there could be unlimited resources then there could not be economics issues. So, the study of how society manages their scarce resources is Economics. In other word, the essence of economics is to acknowledge the reality of scarcity and then figure out how to organize society in a way that produces the most efficient use of resources. People need to take right decision in right time. So, how people make economic decisions regarding their buying goods or services at the market, are ruled by four basic principles. They are: 1. People face tradeoffs All decisions involve tradeoffs. Examples: * Going to a party the night before your midterm leaves less time for studying. * Having more money to buy stuff requires working longer hours, which leaves less time for leisure. * Protecting the environment requires resources that could otherwise be used to produce consumer goods. 2. The cost of something is what you give up to get it. * The opportunity cost of any item is whatever must be given up to obtain it (the biggest cost of one of your alternative options). * Making decisions requires comparing the costs and benefits of alternative choices. * It is the relevant cost for decision making. 3. Rational People think at the margin Systematically and purposefully they can do the best to achieve their objectives. The Rational...
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...Economic Decision Making Renice Taylor ECO/212 Monday, February 14, 2011 Anusuya Chatterjee Economic Decision Making Today, every individual must make a decision in his or her lifetime. However, every individual does not make decisions in the same manner. In economics, there are four major principles of decision-making: “people face trade-offs”, “the cost of something is what you give up to get it”, “rational people think at the margin”, and “people respond to incentives” (Ten Principles, n.d., pgs. 4-7). “People face trade-offs” is simply the concept of giving up one thing that we like for another. “The cost of something is what you give up to get it” means that cost will always be a factor. However, it should not be the only one. “Rational people think at the margin” refers to individuals thinking in shades of gray. “People respond to incentives” deals with the majority of middle-class citizens. Many individuals will hold on to their money until a sale comes along. Recently, my husband and I were in the process of deciding whether to lease a new sports utility vehicle or finance an older one. The benefits of leasing will be driving a new vehicle. There are no worries of damage done with the previous owner, accidents, etc. However, after looking at the marginal costs...
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...Topic: “Elasticity of Demand and Managerial Decision Making” The demand of a commodity depends on the size of the total market or industry demand for the commodity which in turn is the sum of demands for the commodity of the individual consumers in the market. The demand for a commodity arises from the consumers’ willingness and ability to purchase the commodity. Consumer Demand Theory postulates that the quantity demanded of a commodity is a function of the price of the commodity, the consumers’ income, the price of the complementary and substitute commodities and the taste of the consumer. It is also expressed as: Qdx=f(Px, I, Py, T) Where Qdx = Quantity demanded of the commodity X by an individual per time period Px = Price per unity of commodity Y I = Consumer income Py = Price of substitute or complementary commodity T = Consumer taste When the firm increases the price of a commodity, sales generally decline. A manager expects an inverse relationship between the quantity demanded of a commodity and its price. On the other hand, when a consumer’s income rises, he/ she usually purchases more of most commodities, known as normal goods. There are some goods and services, however, which the consumer purchases less as income increases, which are termed as inferior goods. The inverse relationship between the price and the quantity demanded of the commodity per time period is the individual’s demand schedule for the commodity, and the plot of data gives...
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...In week four, the innovative firm, Quasar, is introduced in the market structures simulation. Quasar is leading the way in the computer industry with the design and manufacturing of an all optical notebook computer. Through the market structures simulation, examples on how decision-making differ among the market structures of monopoly, oligopoly, monopolistic competition, and perfect competition. This simulation and the real-life scenarios detailed within, provide insight and understanding to the intricate decisions that are made in each type of market structure and the impact of those decisions. In the Quasar simulation, the C.E.O. utilized pricing as tool for optimizing profits, and with the input from the board of advisors decided to allocate funds to advertising, technology, and other ventures. (University of Phoenix, 2008) Through the course of this paper, a solution will be created using strategic variables, in order to sustain the economic profits that the firm can earn. This paper will also look to identify pricing and non-pricing strategies that will further facilitate the goal of maintaining economic profits. Finally, this paper will ascertain what kind of innovations will best prolong Quasar’s distinctiveness. In 2003, Quasar launched the world’s first all optical notebook computer branded Neutron. Because of Neutron’s processor, memory use and high-speed optical conductors, Neutron boasts approximately 5 times the speed of existing microchip-based computers. Neutron...
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...Effects of Economic Uncertainty on Business Decision Making Market uncertainty has never been higher. Business observers, CEO’s and policymakers have repeatedly raised concerns about the uncertainty of doing business during the ongoing financial and economic crisis of 2007. No one is sure whether or not people who do business with Uncle Sam will be left out in the cold. This kind of uncertainty can play havoc with business and with the economy at large. The Patient Protection and Affordable Care Act (PPACA), widely recognized as Obamacare, was signed into law by President Barack Obama in March 2010. It is intended to decrease the number of uninsured Americans and lower the overall cost of health care in the U.S. Most business owners are concerned about the program’s potentially harmful effects on the cost of employee health care coverage. Charlie McCrudden, vice president of government relations for the Air Conditioning Contractors of America, said “There’s a lot of uncertainty about what contractors will do about providing health care for their employees…” (Anesi). As uncertainty continues to grow in the markets, so do the changes in employment practices. During challenging economic times, many businesses are opting to hire temporary and contract workers as opposed to full time employees. Not only does this hiring practice affect employment rates and the economy as a whole, but is also affects those seeking work and financial stability. Uncertainty and ambiguity...
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...Introduction This review paper shines a light on how vital the use of economic tools is in making managerial decisions as reflected in the simulation. Decision making process of management is described in different market structures. Just as it pertains to any for-profit business organization, the goal is to cut and maximize profits in each type of market structure. Based on the information provided in the simulation, Quasar Computers were involved in an extensive research in developing a pioneer product “the Optical Notebook.” In 2003, the company launched the first all-optical notebook computer and branded it the “Neutron”. This product is described as an energy saving optical technology with its rechargeable batteries capable of lasting up to three days; hence, transcending it into a leading technological product in its unique class. With the assistance of senior executives in the company, the decisions on operational and business strategies relative to a variety of market conditions are taken and discussed. Monopoly Quasar emerged as the only player in the market for its unique optical notebook computer; therefore, establishing a monopoly market structure. Within this monopolist market structure, maximizing profit tends to occur at the point where marginal cost equals marginal revenue based on the result shown by toggling the demand curve. In the initial scenario, it was presented that Quasar had the patent rights on all-optical technology for three years from the launch...
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...Economics through Decision LaFaye P. Moore Jr. ECO/212 Principles of Economics October 12, 2011 Robert Vansant Economics through Decision Decision-making are the process in how to make economics decision. Through economics comes decisive ways in making consult decision. This will show making individual decision in how a person uses economics to their lives. Economics effect every decision that someone make in the world. Example to the principles of individual decision-making Individual decisions have principles in how to make decision. Can someone just make on individual decision that does not affect him or her on economics decision. The principles for individual decision-making are to make your own decision. Individual decision-making personal or business decision because a person can make it for reason. Example if a person is makes a decision at home for their family then that come to the person decision-making. Then on the twist side, the business individual decision-making would be to change the business face. Changing the face of the company by figuring out how changing this will benefit the business. Decision in which compared the marginal benefits and the marginal costs associated with the decision What decision that a person make with marginal benefits and the marginal costs. Benefits and cost marginal are affecting decision-making. The process that takes these two marginal, which helps someone, make a decision that affect his or her choices in the economics...
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...Assignment no: 509 Answer Managerial economics refers to the application of economic theory and the tools of analysis of decision science to examine how an organization can achieve it aims or objectives most efficiently. Importance of managerial economics Managerial Decision Problems Economic theory Microeconomics Macroeconomics Decision Sciences Mathematical Economics Econometrics MANAGERIAL ECONOMICS Application of economic theory and decision science tools to solve managerial decision problems OPTIMAL SOLUTIONS TO MANAGERIAL DECISION PROBLEMS Managerial Decision Problems Economic theory Microeconomics Macroeconomics Decision Sciences Mathematical Economics Econometrics MANAGERIAL ECONOMICS Application of economic theory and decision science tools to solve managerial decision problems OPTIMAL SOLUTIONS TO MANAGERIAL DECISION PROBLEMS Managerial enables the use of economic logic and principles to aid management decision-making. Managers are decision-makers and economics should be relevant to give practical guidance in arriving at right decisions. Every manager has to take important decisions about using his limited resources like land, capital, labour, finance etc. to get the maximum returns, therefore, managerial economics, concentrates on those practical aspects of micro-economics which help in decision-making. Managerial economics focuses on the most profitable use of scarce resources rather than on the achievement of equilibrium prices...
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...MAT 540 Week 2: Decision Analysis |Slide # |Topic |Narration | |1 |Introduction |Welcome to Quantitative Methods. In this lesson, we will discuss the concept of decision | | | |analysis, a valuable technique for decision making process. | | | | | | | |Please go to next slide. | |2 |Objectives |When you complete this lesson, you will be able to: | | | |Analyze decision-making problems electronically. | | | | | | | |To meet this outcome we will cover the following supporting topics: | | | |Components of decision making; | | | |Decision making without probabilities; ...
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...|VI Learning activity questions: Scope of Managerial Economics | | | | | |1. What is managerial economics all about? | | | |Managerial economics applies economic theory and methods to business and administrative decision making. Managerial economics | |prescribes rules for improving managerial decisions also helps managers recognize how economic forces affect organizations and | |describes the economic consequences of managerial behavior. It links traditional economics with the decision sciences to develop | |vital tools for managerial decision making. Managerial economics identifies ways to efficiently achieve goals. For example, suppose| |a small business seeks rapid growth to reach a size that permits efficient use of national media advertising. Managerial economics | |can be used to identify pricing and production strategies to help meet this short-run objective quickly and effectively. | | ...
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...Decision making is the process of choosing among alternative courses of action for the purpose of attaining a certain goal. In this paper I am going to scrutinise a number of courses offered in four different disciplines within a business school and identify how these courses relate with decision making. The conclusions are presented in tabular form. IVEY Business School and The University of Pennsylvania were my source of information. There school of Business offers many different courses all of them lying under or comprising of the different disciplines that are found in business school. Some of these include: i. Business, Economics and Public Policy Course Relation to Decision making Focus Computerized support Intro to Business Economics Explores the economics and politics of public policy to provide the student with an analytic framework. Policy issues relating to taxation, social security, low-income assistance. High Financing and Managing Government Covers cost-benefit evaluations which influence decision making. Role of public policy in affecting the efficiency of markets and the distribution of resources in society. High. Economic Analysis of Law Teaches students how to think as an economist about legal rules and evaluate alternative legal rules. Interpretation of legal rules Moderate Behavioural Economics, Markets, and Public Policy Applies insights from psychology to the study of economic phenomena and decision making. How psychology plays out in markets, where...
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