How People Make Economic Decisions Essay

502 WordsAug 3, 20153 Pages
How People Make Economic Decisions Mary Hale University of Phoenix How People Make Economic Decisions Every day people make conscious decisions. How often, though, do they think that those decisions are affecting our economy? People trade off, compare, weigh cost versus benefit, and respond to incentives when they decide to buy something at the grocery store, buy gas, or even decide to up-size their value meal at the local fast food place. All these actions by people (consumers) cause changes in the economy. The first principle of economics is fairly simple: trading off. We all trade off something to be able to get something better. Take for instance a can of tomato sauce. Two different brands on the same shelf and the differences are the packaging is different, the brand name is different, and the price is different. Yes, the quality is different also. So the average consumer has to make the trade off of quality for price. The second principle of economics is connected to the first because making a trade off requires a comparison of the cost and benefits of taking an action. As stated in the previous paragraph, the consumer weighing the quality for a better price is one part of making the decision. Another part to the decision making process is comparison. If the consumer buys the product with the lower price, what is the consumer’s benefit? The consumer takes this question in to consideration when making the decision to buy the next can of sauce and tries to become more aware of the value to him/her. The third principle is that people think marginally. If the consumer’s goal is to buy a can of sauce with no care as to the price, then the consumer will go the isle it is located on and pick up the first one they see. If the consumer’s goal is to get the most for his/her money, then that consumer will head to the isle and compare price and quantities so
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