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Economic decisions are more difficult today than they were many years ago. Making
economic decisions is more difficult when you’re making purchases as large as a car and as
small as groceries. You need to take many things into consideration before buying either item.
What will happen if I buy this car? Am I going to lose my job soon? Will I be able to afford
these payments? Do we really need this snack food?
There are four different principles in
decision making. I will explain these four principles and incorporate a personal decision I have to
make by using these four principles. The principles are as follows, People face trade-offs, the
cost of something is what you give up to get it, Rational people think at the margin, and finally
people respond to incentives.
“There is no such thing as a free lunch.” To get one thing that we like, we usually have to
give up another thing that we like. Making decisions requires trading off one goal against
another.(Book) That brief explanation talks about how sometimes in our lives people indeed face

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- Spring '08
- unknown
- Finance, Economics, one day, Honda Accord, Rational people
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