Essay Sample on Economic Decision Making: A Vital Skill for All Economics Students

Economic decision making involves decisive actions on matters that pertain to the economy. It is a process that is regularly conducted by economic advisors, finance ministers, business leaders, and individuals that head the major central banks since they have a profound impact on the major economy (Business Economy). Economic decision making, however, is not only needed by the group of people mentioned above but is a skill that should be learned by everyone pursuing the field of economics as a career for various reasons.

Is your time best spent reading someone else’s essay? Get a 100% original essay FROM A CERTIFIED WRITER!

Save 25%

Firstly, it helps the learners to focus on making economic decisions, and this helps them to avoid unnecessary losses both now and in the future. Secondly, it helps the scholars to be more thoughtful regarding consequences and possibilities before making any choice. Thirdly, it helps individuals to make the right choices where benefits are more than the costs incurred hence life-long benefits (Virginia Council on Economic Education, 2020). Those serving in managerial positions, for instance, have to make decisions almost every other time.

There are two models that re usually involved in making decisions. The first one is the rational/ economic man model, which states how managers should behave while making decisions. This model has various features, which include logical reasoning, identification of ends to be met and means to reach them, various alternatives available, and objectives without preference, liking, bias, or disliking. The second model is behavioral model, which is realistic and acknowledges that those making decisions are human and cannot be fully rational as they face limitations, constraints, inadequacies, and problems (Venkatesh,2015).

A rational economic decision-making process usually follows seven steps. The first step is identifying the goal that needs to be achieved. This step seems deceptively simple, but one may find themselves circling back to it to clarify a thing or two. For instance, one might have a goal of purchasing new office equipment while leasing is more economical. After weighing the two options, the goal might change into more global one of replacing and updating the current office equipment.

The second step is collecting all the relevant information. Just like the first step, this too might seem simple, especially when one is relying on one source. One should consult many sources to get all the relevant information required without omissions or bias. This process might need a lot of time and maybe over-whelming to small-business owners who have pressing timelines (Ingram,2018). It, however, has been made easier due to the availability of online information that is readily accessible. The most valuable information, however, is the one that you dig up from people who made a similar economic decision before as their guidance and cautions are so valuable in the economic decision-making decision.

The step that follows is identifying the consequences and alternatives. The information collected in step two enables one to have alternatives. The more information collected though, the more overwhelming it becomes for the decision-maker. It is therefore advisable to take some moment and organize the information collected, making various lists of the alternatives with their respective advantages, disadvantages, and consequences. The fourth step is reviewing the evidence to get the best alternative from the list made above.

The fifth step is making an economic decision. This step should be carefully thought, and if need be, then one can review the third and the fourth step. One needs to take some time and

Contemplate before making this decision. After the decision is made, the next step will be the implementation of that decision. Time taken in implementing the decision varies from one decision to another, depending on how complex or simple the matter is. In instances where one is not working alone but with a team, it is always good to notify the staff involved so that they can not only be prepared but also make necessary groundwork preparations to make the decision a reality.

Lastly, on the seven steps, it is very important to review the decision. This step is, however, either avoided skipped by many small-business owners who only review their decisions when they start doubting their economic decision (Ingram,2018). A decision should be reviewed soon after it has been made to help gain confidence in it and also to use it as a learning model that can be replicated by staff.

The topic of economic decision making is very important to the course material and cannot be overlooked in economic analysis. Any economists should be able to bring rigor and discipline in decision-making. In this course text, it is recommendable to it is good to note two main qualities that help to improve the economic decision making. These qualities are reliability and relevance. Relevance means that all economic information should be teeming and timely with a value that can be predicted. An economist should always expect a return on the investment made.

Reliability, on the other hand, focuses on the accuracy neutrality, verifiability, and conservative nature of the economic information. If the information at hand is doubted, then it is always better to overstate the expense or liability (Ingram,2018). It, however, does not translate to intentional misrepresentation of the value of items, but rather, understating the net income and wealth of a business is better as compared to overstating it.

References

Business Dictionary. (n.d.). What is economic decision making? Definition and meaning. Retrieved February 9, 2020, from https://www.businessdictionary.com/definition/economic-decision-making.html

Ingram, D. (2018, December 18). Basic Factors of Economic Decision Making. Retrieved February 9, 2020, from https://smallbusiness.chron.com/basic-factors-economic-decision-making-3944.html

Venkatesh. (2015, May 15). Decision-Making Models: Rational and Behaviour Model. Retrieved February 9, 2020, from https://www.yourarticlelibrary.com/management/decision-making-management/decision-making-models-rational-and-behaviour-model/53213

Virginia Council on Economic Education. (2020, February 5). Economic Decision-Making. Retrieved February 9, 2020, from https://vcee.org/economic-decision-making/