Making Economic Decisions Essay

3346 words - 14 pages

Chapter 1: Making Economic Decisions

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A survey of students answering this question indicated that they thought about 40% of their decisions were conscious decisions.

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|(a) |Yes. |The choice of an engine has important money consequences so would be suitable for engineering economic |
| | |analysis. |
|(b) |Yes. |Important economic- and social- consequences. Some might argue the social consequences are more important than|
| | |the economics. ...view middle of the document...

Note that if you could double your money every day, then:

2x ($300) = $1,000,000
and x is less than 12 days.

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Maybe their stock market ‘systems’ don’t work!

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It may look simple to the owner because he is not the one losing a job. For the three machinists it represents a major event with major consequences.

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For most high school seniors there probably are only a limited number of colleges and universities that are feasible alternatives. Nevertheless, it is still a complex problem.

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It really is not an economic problem solely — it is a complex problem.

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Since it takes time and effort to go to the bookstore, the minimum number of pads might be related to the smallest saving worth bothering about. The maximum number of pads might be the quantity needed over a reasonable period of time, like the rest of the academic year.

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While there might be a lot of disagreement on the ‘correct’ answer, only automobile insurance represents a substantial amount of money and a situation where money might be the primary basis for choosing between alternatives.

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The overall problems are all complex. The student will have a hard time coming up with examples that are truly simple or intermediate until he/she breaks them into smaller and smaller sub-problems.

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These questions will create disagreement. None of the situations represents rational decision-making.

Choosing the same career as a friend might be OK, but it doesn’t seem too rational.

Jill didn’t consider all the alternatives.

Don thought he was minimizing cost, but it didn’t work. Maybe rational decision-making says one should buy better tools that will last.

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Possible objectives for NASA can be stated in general terms of space exploration or the generation of knowledge or they can be stated in very concrete terms. President Kennedy used the latter approach with a year for landing a man on the moon to inspire employees. Thus the following objectives as examples are concrete. No year is specified here, because unlike President Kennedy we do not know what dates may be achievable.

Land a man safely on Mars and return him to earth by ______.
Establish a colony on the moon by ______.
Establish a permanent space station by ______.
Support private sector tourism in space by ______.
Maximize fundamental knowledge about science through x probes per year or for $y per year.
Maximize applied knowledge about supporting man’s activities in space through x probes per year or for $y per year.

Choosing among these objectives involves technical decisions (some objectives may be prerequisites for others), political decisions (balance between science and applied knowledge for man’s activities), and economic decisions (how many dollars per year can be allocated to...

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