Economic Decisions Paper - 685 Words

How People Make Economic Decisions Paper Eco/212 September 28, 2010 Making Economic Decisions Economic decisions made by individuals can affect the economy. The principles of individual decision-making include people being rational, economic incentives, and optimal decisions made at the margin. Trading the three economic systems are market economy, centrally planned economy, and mixed economy. Each contains their own attributes on how they contribute to an economy. The current economic system in the United States is a mixed economy. Individual Decision-making People try to be rational. â€Å"It means that economists assume that consumers and firms use all available information as they act to achieve their goals. Rational†¦show more content†¦Ã¢â‚¬Å"Opportunity cost is the highest valued alternative that must be given up to engage in an activity† (Hubbard, amp; OBrien, 2010). In some respect, it is an individual’s marginal cost versus marginal benefit. Questions such as what is to be produced, how will it be produced, who is receiving the goods need to be answered. Types of Economies These questions are answered by different kind of economies. The general population drives market economies. Goods and services are in supply as much as they are in demand unless there is some sort of constraint. Government drives centrally planned economies as they dictate how much of a product and service are produced. These economies are usually run by dictatorships or communism. Last, there is mixed economy. The United States is a mixed economy as the general population runs the market demand and supply. However, the government regulates some products and goods. Government intervention has occurred recently after the British-Petroleum oilrig exploded off the shore of Louisiana. President Obama placed a ban on any further offshore drilling sites close to the coast. â€Å"Weve placed a six-month moratorium on drilling new deepwater oil and gas wells in the Outer Continental Shelf† (Obama, 2010). This may raise costs in oil products in the future becau se of a shorter supply. Summary Economic decisions come with an opportunity cost. 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