Four principles of individual decision making?

Answer 1

Each decision we make has risks associated with it. Because of these risks, making decisions is often very difficult. As you make decisions, keep in mind four basic principles:

1. Never risk more than you can afford to give.
2. Never risk more than you have.
3. Never risk more than you can get in return.
4. Follow you intuition.
   

Principle 1.
Never risking more than you can afford to give refers to more than just financial ventures. Never take any risk that demands more of yourself or your resources than you are willing and able to give. You alone know what you can afford -- in terms of time, energy, emotions, and so on. Think about the decisions you make when you choose your courses at registration. You should not enroll in courses that demand a lot of outside class work if you are not willing to put the time and effort into them outside school.

Principle 2.
The second principle implies that you are limited in resources. You do not have an unlimited supply of energy, time, space, or money, and you cannot risk more of these resources than you possess. Any decision uses one or more of these resources, but no action should deplete all your resources in any given area.

Principle 3.
This principle suggests that you view each decision in terms of what it will produce for you. Take a risk only when you can profit from it.

Principle 4. This principle simply means that you should feel good about your decision. No one can make decisions for you. As a teenager, you may feel that your parents have forced you to make certain decisions. This is almost never true. Even when you allow another person to decide for you, you are still making a decision -- the decision to make the choices that another person wants you to make.

And finally, a decision is a commitment and it should be one you are willing to trust and abide by. Good decisions are those that open up more possibilities for future choices.

Answer 2

Economics Applied 1

Economics when applied to real life sounds beautiful. this blog is for those students who are discovering the different facets of economics applications and want to share their discoveries.

Friday, July 20, 2018

Four Principles of Individual Decision Making

Principles of Individual Decision-making

In life, we have to make a decision just about everything that we do. These decisions affect our daily lives and they sometimes they affect the lives of those around us. When making these decisions there are make factors that go into making a final one. In economics there are four principles that effect how a person makes a decision.

List of four principles of individual decision making.

People face trade-offs.

The cost of something is what you give up to get it.

Rational people think at the margin.

People respond to incentives.

These four principles play an important role in economics. This paper will define each individual principle and then give the rater an insight on a personal decision of the author using the aforementioned principles.

People face trade-offs.

Making a trade-offs is basically, choosing one thing over another. As modern technology advances, one could argue that society has traded-offs battery life in personal electronics for a smaller size and weight of the individual device.

The Cost is What You Give Up

After you have looked at what is being traded-offs, then you can determine the true value of your decision by what you are giving up for it. As in the previous example of personal electronics, giving up battery life has a serious downside in that the personal electronic device will have to charge. Here the cost can be a great one to a person that is constantly on the go.

Rational people think at the margin

Being rational means that an individual will do all that they can to achieve their goal with all that they have available to them. A rational personal thinking at the margin or on the edge will be able to make decisions that allow them to achieve their goal without giving up to much in overall cost. Going back to the personal electronic device, an individual could choose to go with the smaller and more lightweight device because of its portability, but they’ll bring along a portable charging device also, or use the product more sparingly to make the most of the available battery power.

People respond to incentives

An incentive can be carried to something positive like a benefit or something negative like a consequence. Incentives can be a large part of an individual decision making process. The incentive that an individual would most likely respond to when choosing the new personal electronic device would be that they are carrying around less weights, therefore making them more mobile. The consequence side that would affect the decision would be rooted in the fact they will not be able to use the device as much as they would like.

Conclusion

In an economy there are four principle that are vital to the decision making process of how it will distributes its resources. The first is Trade-offs, giving up one thing for another. Then the determination of the cost of what you are giving up to get to your goal. Third, is the thought that rational people think at the margin, meaning one will take advantage of all opportunity to achieve one’s goals. Finally, the principle that people respond to incentives, assists in determining the quantity or price of a certain resource. These principles are also applied in individual decision-making, and the results can affect more than just an individual but an entire economy.