How People Make Decisions Essay

799 WordsNov 26, 20124 Pages
Briefly explain the principles do individual decision-making. The principle of individual decision-making is when people are rational, people weigh out their benefits and cost of each goal that they have. Rational decisions are at margin-people make themselves happy most of the times. For example, if one prefers to have more money, they would value this against having to work more. What makes people happy is an incentive; people only act when they receive benefits. Optimal decision is made at margin: when producing one more additional unit of goods economists use the word marginal. Economists mean that the optimal decision is to continue any activity to where the margin benefit equals the marginal cost. Provide an example of a decision in which you compared the marginal benefits and the marginal costs associated with that decision. For example, in examining the marginal cost of producing one bushel of apples. That number could be expressed as the dollar value of corn or other goods that could be produced, this is how I compare the marginal benefit and the marginal cost associated with the decision when purchasing fruit and vegetables What were the marginal benefits and marginal costs associated with that decision? Marginal benefit refers to what people want to give up when they want to receive another unit of goods, while marginal cost refers to the value of what is given up in order to produce additional units. As long as marginal benefits exceed marginal cost, additional units of goods should be produced. It is inefficient to product or achieves marginal benefits when marginal benefits are equal to marginal cost. Economics are not all about money and Business; people often perceive it to be this way. In real life, what economics is about, decision making. Economists are known to think margin while this seems complex notion in the beginning,
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