How People Make Economic Decision Paper

How People Make Economic Decision Paper - 1 HOW PEOPLE MAKE...

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1 HOW PEOPLE MAKE ECONOMIC DECISIONS PAPER How People Make Economic Decision Paper Christina Roddey ECO 212 05/23/2011 Luis Torres
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2 HOW PEOPLE MAKE ECONOMIC DECISIONS PAPER The Principles of Individual Decision-Making There are four principles of individual decision-making. They are: 1) Trade-offs 2) Opportunity costs 3) Margins 4) Incentives A trade-off is an exchange of one thing in return for another, especially relinquishment of one benefit or advantage for another regarded as more desirable. A classic trade-off in business is the trio of time, money, and quality. It is generally considered that only two of the three can be anchored at any given time. An opportunity cost is a cost of passing up the next best choice when making a decision. For example a person who wants to watch two televisions shows which comes on at the same time, can record the best one for later and watch the other on time. A margin is a set of constraints that are like borders. A marginal change is the changed associated with a relaxation or tightening of constraints. It is either changed of constraints or in response to this. An incentive is any factor that
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How People Make Economic Decision Paper - 1 HOW PEOPLE MAKE...

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