How People Make Economic Decisions ECO/212 Khanthary Singnhoth University of Phoenix Robert Marsellis July 07, 2011 “Rational individuals weigh the benefits and costs of each action and choose an action only if the benefits outweigh the costs,” (Hubbard and O’Brien 20). This concept to many economists is known as the principles of decision-making. The main focus of this paper is to evaluate how individual decision-making affects an individual’s decision economically based on marginal costs and benefits and the incentives behind an individual’s decision. According to the principles of decision-making, there are four economic principles in individual decision-making. The first of the four is people make tradeoffs.
ECON 1312 Homework Assignment # 2 Chapter 4 1. Why do we need a units-free measure of the responsiveness of the quantity demanded of a good or service to a change in its price? Answer: To measure or to compare the demand of the two unrelated goods or services. 2. Define the price elasticity of demand and show how it is calculated.
What theory of profit best reflects the performance of the plasma screen makers? 2 To reduce Agency Problems, executive compensation should be designed to: Correct Answer: create incentives so that managers act like owners of the firm. 3 Economic profit is defined as the difference between revenue
D. use of policy to refute facts and hypotheses. 2. In economics, the pleasure, happiness, or satisfaction received from a product is called: A. marginal cost. B. rational outcome. C. status fulfillment.
| | Answer Key: C | | | Question 2 of 10 | 10.0 Points | When we are forced to make choices we are facing the concept of: | | A.ceteris paribus. | | | B.free goods. | | | C.scarcity. | | | D.the margin. | | Answer Key: C | | | Question 3 of 10 | 10.0 Points | An economic system is the set of rules that define _______ and _______ .
Quiz #1 1. TCO 1) The primary focus of the study of economics is on making the most efficient use of scarce productive resources. 2. (TCO 1) The key economic concept that serves as the basis for the study of economics is Student Answer: scarcity. 3.
Discuss surplus-enhancing transactions in markets 6. Explain how elasticity affects the way in which the burden of a per-unit tax is shared between buyers and sellers 7. Explain how elasticity affects the size of the deadweight loss created by a per-unit tax **NOTE: All of chapter 5 of Hubbard, Garnett, Lewis and O’Brien (2011) Microeconomics, 2nd edition, Pearson is required reading. 1. Consumer surplus The difference between the highest price a consumer is willing to pay for a good or service, and the price they actually pay.
Cost Benefit Analysis can be done by the financial costs and financial benefits. You might make the decision to take account of insubstantial things in the analysis. You have to make an educated guess on a monetary value for these, this unavoidably gives a part of subjectivity in the procedure.
A firm utilizing a cost leadership strategy seeks to be the low-cost producer relative to its competitors. A differentiation strategy requires that the firm possess a "non-price" attribute that distinguishes the firm as superior to its peers. Firms following a focus approach direct their attention to narrow product lines, buyer segments, or geographic markets. "Focused" firms will use cost or differentiation to gain advantage, but only within a narrow target market. COST ADVANTAGE
Authors Glenn Hubbard and Anthony Patrick O’Brien in their book “Economics” present three key economic ideas that aid our renter. Those ideas are: People are rational, People respond to economic incentives, and Optimal decisions are made at margin. People are Rational Shane (1999-2010), “Economists assume that people are rational decision-makers who rank their preferences and pursue those that will provide the highest level of satisfaction, or utility. (Introduction to Principles of Economics, para. 6).