Accounting-Economics
Decision Making
Each decision we make has risks that associated with it. Because of these risks that are involved, making decisions is often very difficult. When one makes decisions it is important to keep in mind four basic principles: Principle 1- One should never risking more than they can afford to give. One should never take any risk that demands more of themselves or their resources than you are willing and able to give. Principle 2 -- A person should never use more resources than they have available. Any decision uses one or more resources, but no action should deplete all available resources. Principle 3- Take a risk only when you can profit from it. Principle 4- This principle simply means that you should feel good about your decision (Principles of Decision Making, n.d).
When people make decisions they often face tradeoffs. Most of the time in order to get one thing, you have to give up something else. Making decisions requires trading off one goal in order to obtain another. The cost of something is what you have to give up in order to get something else. Those who make decisions have to consider both the obvious and implicit costs of their actions. Rational people think on the brink of the margin. This means that a rational decision-maker takes action if and only if the marginal benefit of the action exceeds the marginal cost. People tend to always respond to incentives. Behavior often changes when costs or benefits change (Principles of Economics, 2006).
People make decisions based upon two things. What they are going to get out of the decision and how much is the decision going to cost. People weigh decisions by comparing the marginal benefits against the marginal costs (Marginal Analysis, n.d.) And since people strive to get the most bangs for their buck, making less risky and thus less costly decisions will most often win out. The economic system as a whole relies heavily on the fact that people are going to take some risks and make some decisions.
Works Cited
"Marginal Analysis." n.d. 16 May 2009
http://sorrel.humboldt.edu/~economic/econ104/marginal/
"Principles of Decision Making." n.d. 16 May 2009
"Principles of Economics." 2006. 16 May 2009 http://www.slembeck.ch/principles.html
Accounting Economics Marginal Analysis Define marginal revenue. Explain its relationship with total revenue. Marginal Revenue (MR) is the revenue that is linked to one more additional unit of production. The demand for the product will determine whether it will be higher or lower or even the same as the previous unit of production revenue. MR can be defined therefore as the addition realized revenue to the Total Revenue (TR) by a unit increment in
M.L., 2007). Managing a project where little support is present from upper management requires a precise degree of stable consistency in the way of project deployment, supervision and follow-up. There is much ado with executive decision making. When topics and issues arise where input or answers are likely to be unpredictable without higher level determination, a project manager is forced to put his/her best judgment to use while considering every
However, they have also changed the face of the accounting profession in a way that will affect the education and conduct of accountants in the future. In the future, the accountant will have to do more than to balance the books. In order to understand the potential educational requirements for accountants in the future, we will examine how they have changed historically and then apply the changes that have
Economic Environment of a Business The objective of this work is to summarize the economic environment of a business including information relating to microeconomics, macroeconomics, and international trade aspects The business organization is a "micro-economic unit" and the business environment is that which makes provision of the "macro-economic context within which firm operates." (Reddy, ) The business environment can be categorized into the 'economic' and non-economic' and the 'micro- and macro-environment. (Reddy,,
Yet, financial statements and managerial accounting reports can be highly effective nonetheless. Sometimes they will merely confirm what the proprietor already knows, but there are inevitably going to be times when they will reveal that the proprietor's assumptions about the nature of the business are false. Moreover, accounting can act as essentially a second opinion. The proprietor may feel one thing is true, but the numbers can reveal something
Leverage permits superior possible returns to the investor than otherwise would have been obtainable but the probable for loss is in addition superior, since the investment becomes valueless, the loan principal and all accumulated interest on the loan still need to be paid back (Kotarski, 2009). In monetary economics it has been projected for a long time that financial capital is put into a company each time the probable return
Our semester plans gives you unlimited, unrestricted access to our entire library of resources —writing tools, guides, example essays, tutorials, class notes, and more.
Get Started Now