In today’s economy, decision-making skills vary for each household; however, the bottom-line goal for every individual is to get the most for their money. In order to do this, there are 4 principles of individual decision-making: facing trade-offs, evaluating what one is giving up to obtain their goal, thinking at the margin, and responding to incentives.
The first principle in individual decision-making is facing a trade-off. In order for individuals to accomplish their goals or to obtain something they desire, there is usually something that must be given up or traded to accomplish that. In Chapter 1 Principles of Economics, efficiency vs. equity is discussed which helps further explain this principle. Society is always desiring to obtain the most for their money; getting the best they can. This is called efficiency. While trying to get the most out of our everyday decisions, we must also consider equity and making sure that the economic prosperity of our decisions is fairly distributed.
The second principle goes hand-in-hand with the first. “Because people face trade-offs, ma...
Before starting this reading assignment I never thought to question why I make the decisions I do in such a short amount of time. After reading Blink: The Power of Thinking Without Thinking, written by Malcolm Gladwell I have a better understanding of how we as individuals perceive and react to information. This book provides insight on how to critically asses and understand the way our minds operate on a deeper level. The book consists of 6 chapters, each providing insight on how the decision making process works and how it affects what we do with every second of the day. Throughout each chapter there are subsections with personal stories, case studies, or examples that help provide an alternative view on how the decision making process is carried out under normal circumstances.
It has been noted from the text that our perception influences the thinking and decisions we make. It shows that choices differ because of the different understanding that individual have. In addition, our intuition is essential and at many times it provides us with guidance on how to make decisions. However, we can see that this intuition can be misleading at times and therefore the best thing is to evaluate the available evidence before making decisions. In my view decision making tends to have disciplinary across individuals. The best thing can be is to take time and individuals should not rush when it comes to making critical decisions. It is because of the outcomes that might be expected in the
The Principle of Utility in simple terms states that actions are right so long as they promote
“The value of the next best alternative foregone as the result of making a decision”(Brue, 2005)
The Paradox of Choice: Why More is Less, by Barry Schwartz, is focused on the analysis of personal behavior in relation to decision making. As the title implies, the author emphasizes the main point that more choices actually lead to less of an ideal experience. In recent years, choices have become almost unlimited, and this has led to an increase in unnecessary stress placed on the consumer. The availability to make decisions in virtually every aspect of life creates a new level of responsibility on individuals. Decision making can lead to an enormous group of positive and negative feelings. Some of which include satisfaction, happiness, regret, disappointment and even depression. It is important to explore the broad category of decision making
Decision making theories and models largely derive from the fields of psychology and economics. The Lens Model (Brunswik, 1952) was a conceptual design, sparking a plethora of literature outlining subsequent models and theories on judgements and decision making. Brunswik set out that an individual uses fallible ‘cues’ from their environment while trying to be as empirically accurate as possible in making judgements. Hammond (1967), an architect of modern decision making theory built on this conceptual model with his Cognitive Continuum Theory (CCT), which looks at the combination of an individual’s cognitive ability and their use of situational ‘cues’ when making a decision (Hammond et al, 1967; & Hammond, 2000). CCT works on the notion that decision making is based on a certain systematic process: the analysis
Efficiency is concerned with the optimal production and allocation of resources given existing factors of production while equity is concerned with how resources are distributed throughout society (Pettinger, 2010). The equity-efficiency trade-off is an economic situation in which there is a perceived tradeoff between the equity and efficiency of a given economy. This tradeoff is commonly viewed within the context of the production possibility frontier, where any additional gains in production efficiency must be offset by a reduction in the economy 's equity. Within this equity and efficiency tradeoff, equity refers to the economy 's financial capital, while efficiency refers to the future efficiency in the production of goods and services. This theory asserts that, in order for a nation to
The world we live in is overflowing with choices and chances. Every day, each and every human must make thousands of decisions. Some decisions may be rather simple to make, or not present a high chance for an unfavorable outcome. While one may decide the apple they picked up from the store is not very sweet, the cost lost on the apple is rather minimal and the consumer will most likely be presented with many more opportunities to pick a delicious apple. However, some choices are much more complicated. Decisions such as where to invest one’s money, or what physical challenges to endure, present very serious consequences. If the wrong decision is made, one could lose their financial security, or even their life.
Efficiency is highly prized in a culture turned toward productivity. It is therefore cultivated in contemporary business administration theories. It also tends to be prized above all other values in modern society, as society is more and more oriented toward technological advancement. Efficiency is also defined here as the most economic or the shortest or fastest or most simple way of realizing or achieving a goal with the least cost.
In fact, a study shows that age influences decision making, and that older adults prefer fewer choices than younger adults (Reed, Mikels, & Simon, 2008). However, the decision making process is typically quite specific to the particular decision in question. Vying to solve a tough problem will lead an individual to attempt different methods to solve their problem than a simple task would. For example, a complex decision, such as which college to attend may take a multi-step approach, while choosing one’s dinner usually would not. To conclude, the factors that influence human decision making vary from person to person, and from situation to situation.
During this paper I will explain my values, decision making style, personality type, and goals. Values play a big role in each individual’s daily lives from the day they was a small child to the day they pass away. Although, some people’s values differ does not mean they are less important. A person’s personality will explain how they interact with others, and their strengths and weaknesses. Using deciding styles can help you when making decisions. Also, by setting goals we are more likely to achieve them. Making a goal choosing SMART, we can determine the Specific, Measurable, Attainable, Relevant, and Time-Bound to develop a reasonable goal.
Therefore, to achieve this objective, managers have to make choices in decision-making, which is the process of selecting a course of action from two or more alternatives (Weihrich & Koontz; 1994, 199). A sound decision making requires extensive knowledge of economic theory and the tools of economic analysis, that are directly related in the process of decision-making. Since managerial economics is concerned with such economic theories and tools of analysis, it is very relevant to the managerial decision-making process.
Individuals are always confronted with decisions. America is changing into being more materialistic and it is becoming a problem in schools. It may be a matter of constrained time. The economy is critical on the grounds that it widens our comprehension, which thusly enhances the expectations for everyday comforts. Matters of trade and profit are paramount to ordinary life on the grounds that it gives social order an adjusted and composed framework for cash administration and business cycles. What ties the individuals and their lives together is the manner by which they choose to settle on the decisions against the risk of lack. The economy is about why individuals settle on the decisions they do and what the suggestions or impacts of those decisions are, and it assumes a significant part in everyone's lives. As America advances in technology, our materialism appears to grow and technology has become a tool for distracting individuals.
Langdon, K. (2001). Smart things to know about decision making. Retrieved December 9, 2007, from eResourse.
Making decisions is an important part of our everyday life. Decisions define actions and lead to the achievement of goals. However, these depend on the effectiveness of the decision-making process. An effective decision is free from biases, uncertainties, and is deeply dependent on information and critical thinking. Poor decisions lead to the inability to achieve set objectives and could lead to losses, if finance is a factor. Therefore, it is important to contemplate about quality and ways to achieve it in decision-making, which is the focus of this paper. The purpose is to look into the needs of decision-making, including what one should do and what one should not do.