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Unformatted text preview: How People Make Economic Decisions How People Make Economic Decisions G. Francis T ECO/212 November 20, 2010 Dr Pete Mavrocordatos How People Make Economic Decisions People are faced with choices to make every day because we live in a world of scarcity. People must make decisions on almost every aspect of their live. The author uses a few principles to apply to the individual decision making. The first idea behind a decision being made by and individual is that they are rational. The second idea is that people respond to economic incentives and finally the third is that optimal decisions are made at the margin. When the author says rational people, he does not necessarily mean that they know everything or they make the best decision. What he means is that people normally make a decision that benefits them instead of hurts them. For example a person will by a shirt because it is either confortable, cheap, or even fashionable but not because it is more expensive or uncomfortable or perceived as...
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- Spring '11