Friday, May 8, 2020

How Economic Decisions Are Made - 716 Words

How Economic Decisions Are Made Penelope Carter ECO 212 April 2, 2012 David Smith How Economic Decisions Are Made If 10 people with 10 different occupations are asked to define economics, one would receive 10 different answers because the concept of economics confuses people. â€Å"Economics is the study of the choices consumers, business managers, and government officials make to attain their goals, given their scarce resources,† (Hubbard O’Brien, 2010, p. 4). Oftentimes, people do not realize how many economic decisions they regularly make. People make daily economic decisions by comparing marginal benefits and marginal costs in conjunction with their current economic market system. Marginal Benefit and Marginal Cost I can†¦show more content†¦Determining how to produce goods and services can be a situation such as whether General Motors keeps a production plant in the United States in an effort to keep Americans employed or to move production to Mexico to take advantage of reduced labor costs. â€Å"In the United States, who receives the goods and services produced depends largely on how income is distributed. Individuals with the highest income have the ability to buy the most goods and services,† (Hubbard O’Brien, 2010, p. 8). Economic Systems When studying economics, one quickly learns there is a market for everything and the market drives the economy. â€Å"A market is a group of buyers and sellers of a good or service and the institution or arrangement by which they come together to trade,† (Hubbard O’Brien, 2010, p. 4). In an effort to answer the production questions of what, how, and who, as they relate to goods and services, societies arrange their economies in two primary ways. The first way is the centrally planned economy where the government chooses the distribution method for economic resources; the second way is the market economy where households and firms interacting in markets decide the distribution of economic resources, (Hubbard O’Brien, 2010). The former Soviet Union was the most recognized centrally planned economy; however, Cuba and North Korea’s economies also operate in this manner. The UnitedShow MoreRelatedThe Economic Problem Of The Market Economy1237 Words   |  5 PagesThe economic problem faced in the market economy is that there are an unlimited amount of wants with a scarce amount of resources. They only current solution is to make decisions as the desire of satisfying all wants is not possible. 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