DQ1 Essay Example | Topics and Well Written Essays - 500 words - 6

DQ1 - Essay Example Consumers decide about the goods and services they prefer to purchase while the objective of business firms is to decide on how to produce products and the variety of products to be produced. Government entities aim to provide public services and decide on the methods to finance them. The behavior of these varying sections of the society may be termed as purposeful behavior in terms of managing resources and finance, though it may be noted that institutions and people are not free from faulty decision making because decisions are influenced by emotions and by people around the decision maker. Economists consider the marginal analysis while decision making; a comparison of marginal costs and marginal benefits. In this context, marginal means additional, extra or a change in. For example, economists analyze whether a business should reduce or expand or whether the government should increase or decrease funds for a particular cause. A rational decision maker must compare both marginal costs and benefits while making a choice. Economics gives significance to scientific methods to observe consumption behaviors and outcomes and derives hypothesis (cause and effect), tests and modifies the hypotheses using facts and finally evolves it into economic theories or principles that predicts the outcomes of specific actions. Therefore, it is important to study economics, because economics concerns with theories and methods that support facts about how institutions and individuals essentially behave in producing, consuming and exchanging goods and services and thereby find a logical balance while consuming the available resources in this world (McConnell 2005 p.4-6). The sacrifice made by the society to acquire more of one product and when the society forgoes the chance of availing the next best thing, the sacrifice is called the opportunity cost of choice. Every option includes marginal benefits because of marginal costs (scarce resources). While making a reasonable