decision making model

​Decision Making A fundamental lesson in economics is that there is no such thing as a free lunch. There is no such thing as a free lunch because individuals, businesses, governments, and economic systems all face scarcity. Because of scarcity, we must make choices; and the consequence of every choice is that something else is not chosen. This means that for every personal, workplace, and governmental decision there is a cost— the something else not chosen. A wise decision involves weighing the benefits and costs of the alternatives from which individuals must choose. There is no getting around the condition of scarcity, or the choices and costs it creates.

We face scarcity because our resources are limited and our economic wants are unlimited. Economic wants always outstrip the limited resources available to satisfy them. Without scarcity, it would be a different world; everything you wanted would be freely available. People's wants are never fully satisfied. No matter what we already have, we would like to have more. The United States is one of the richest nations in the world, but poverty still exists. Even wealthy individuals desire more. Few of us are ever fully satisfied with our education, health care, and standard of living. Most everyone would like to have a higher income.

Our wants are limited only by our imagination. Wants also change over time. Twenty years ago, few, if any, Americans had DVD/Blu-ray players, cell phones with cameras and video, MP3 players, car navigation systems, or digital cameras. Millions of people now own these items. Unfortunately, our resources are limited. We have only so many human resources, natural resources, and capital resources. Human resources are the physical, intellectual, and creative talents of people.

When you are working, you are using human resources. Also, when you get a better education, you are said to have improved your human capital. When people are better educated, they tend to be more productive; as a result, they usually enjoy a higher standard of living.

​Step 4: Evaluate Your Alternatives Maria must now evaluate her alternatives against her criteria. She has decided to use the decision-making grid shown at the end of this exercise.