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Making Economic Decisions

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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, and the cost of attending school. The marginal benefits of the decision exceeded the marginal cost, which led to the decision to return to school.
Some incentives could have led to a different decision. If I were offered a wage comparable to the wages that I would receive with a bachelor’s degree, or a job that would allow me to receive on-the- job training to advance in my field the

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