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Gary Brockington

In: Business and Management

Submitted By gzbrockington
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How People Make Economic Decisions Paper
Gary Brockington
ECO/212
7-25-2010
Anil Marthur

How People Make Economic Decisions Paper People make economic decisions every day throughout their lives. In this paper I will describe the three economic principles of individual decision-making. I will provide an example of a decision which I took part in and compared the marginal benefits against the marginal costs. I will also give those marginal benefits and costs acquainted with that decision. I will tell which incentives could have led me into making a different decision. Last I will explain how the principles of economics affect people’s decisions, interaction, and how the economy works as a whole. There are three economic ideas concerning people who have to make economic decisions. One is people are rational. This means that an individual always weighs the benefits and costs, and make their decisions only if the benefits outweighs the costs (Hubbard, O’Brian, 2010). The second economic idea is people always respond to economic incentives. This simply means that people respond to incentives from variety of motives (Hubbard, O’Brian, 2010). The third idea is that optimal decisions are made at the margin. This means that when he or she is making a decision in which they are going to hit the jackpot or lose everything. There have been many cases in which I had to look at the marginal costs and the marginal benefits. The biggest decision I had to make was whether I was going to go back to college. I compared the marginal costs versus the marginal benefits. I found the marginal benefits of going back to school to be extremely higher than the marginal costs. The marginal costs would be me being able to pay for college after I graduate. The marginal benefits were higher due to the fact of how much money I will be making once I finish my degree. The Economic...

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