Economics Case

Benefits and marginal costs are two important concepts that govern this world of Economics. Marginal cost is quite important, because being able to determine the need to adjust the rate of production is critical. Marginal benefits are considered as a "gain" to be earned if the rate of production gets adjusted. Marginal costs and its benefits are not just some random economic concepts; they're prevalent in practical daily activities of producers and consumers.

These factors play pretty intense decision making factors in the lives of everyday people. Basic human instincts on decision making stem from the benefits that we as a people can potentially gain from something else. Basic questions people tend to have before they purchase an item are: "Will it be cheaper if I buy one more thing, and get two for one?". Ultimately, people decide based on their own system of reasoning. As big a part as economics plays in everyday people's decision-making, decision making is just as important in the economics world, because for every decision made; there are always risks and advantages involved.

When most individuals make economic decisions, they usually use the four principles of decision-making, sometimes it being subconsciously. For example, when making a purchase on a high priced, tangible product like a vehicle, a consumer knows what he or she is looking for like price, color, make, model, trim, and accessories when deciding to purchase a vehicle. Usually price is the first and foremost deciding factor when considering putting an offer on the table for the vehicle, and if the cost of the vehicle is too high for the buyer, then that's why the car dealer considers lowering the cost. One of the factors a car dealer will consider before even offering to lower the cost

is the demand of that actual vehicle. If there is no demand, and sales are down, then it is likely that a car dealer will lower the sticker price and be more willing to negotiate. If the demand of the vehicle is high, then the car dealer may increase the price to reflect the supply that he currently has on hand.

There are four principles of individual decision-making according to N. Gregory Mankiw: Principle 1 states: People face "trade-offs", which is making decisions trading off one goal for or against another. Principle 2 states: The cost of something is what a person is willing to give up attaining it after they compare the costs and benefits of alternative courses of action for that plan. Principle 3 states: Rational people think of the margin that can systematically and purposefully do the best they can to achieve their objectives. Principle 4 states: People respond to incentives which in turn cause a chain reaction for people to act on something.

In a world with so many options; and so little time, choices are important. Being able to weigh your choice before actually making it is what is