I need some examples of economic decisions made by the individual, the family, and the country.

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To comprehend the very nature of economic decisions, one must understand the origins of the term. Adam Smith, the father of economics, defined economics as the study of how nations acquire and keep their wealth. In that sense, taxation policies are examples of economic decisions made by a country. An individual or family might make economic decisions when it comes to budgeting.

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Almost no one has unlimited economic resources. Most people, most families, and certainly all countries experience shortages in funds. In other words, they want (or perhaps need) more than they can afford. Therefore, they have to make economic decisions about how to prioritize and use the resources they have. Let's look at some examples.

Individuals make economic decisions every day. Almost everyone has experience with this. You might really have a craving for an extra-large sticky, delicious latte, but you only have enough cash to purchase a cup of coffee. You might use your credit card, but you don't really want to do that for such a small purchase, so you settle for the cup of coffee. You've just made an economic decision about how to allocate your limited resources. You make these kinds of decisions all the time when you decide whether or not you can afford that new piece of clothing, those new shoes, or that new computer. You also make higher level economic decisions when you choose what kind of job you take, whether to switch jobs, or whether to pursue further education.

Families make economic decisions all the time, too. Think back to when you were a child and you really wanted that new toy. Your mom told you “no” because your family's budget was stretched tight enough already that month. As much as it might have disappointed you, she made a necessary economic decision for the family. Families have to think about their budgets frequently, determining how much they can spend each month and where they must prioritize those resources. Rent or mortgage payments, utilities, food, insurance, and transportation top the list. When those are allocated, families have to decide whether or not they have enough left for entertainment or vacations or other non-necessities.

Countries, too, must make economic decisions about how to assign their limited resources. Government leaders create budgets that set certain priorities, defense perhaps or domestic programs. They have to decide how much to allot to each priority and then determine what to do with any resources left over (or more commonly, figure out how to deal with budget shortfalls). Leaders also have to determine levels of taxation and borrowing so they can bring in money to satisfy their budget requirements.

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Economics is the study of how people, companies, and governments manage their wealth using scarce resources. Money is an example of a scarce resource. People need money to satisfy their needs and wants, but they have to work to earn that money. The decision by an individual to seek employment is an example of an economic decision. Some people start a business to create jobs for themselves and others.

Budgeting is an example of an economic decision made by a family. Couples monitor their expenses to meet their financial goals. Maybe they want to buy a house or save up for their children’s college tuition. Economic decisions often result in sacrifices. You have to forgo the benefits of one decision to enjoy the merits of another. The economic word for this is opportunity cost. Normally, the gains of the chosen alternative are more than the forgone one.

Let’s look at why taxation is an economic decision made by a country. Federal and state governments need money to run public organizations. Part of that money comes from taxation. An example of a public institution is a law enforcement agency. Police officers maintain law and order in the community. A peaceful nation is prosperous because people can work without fear, and factories can run without interference. The output produced by manufacturing plants leads to GDP growth.

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Economic decisions are those decisions in which people (or families or countries) have to choose what to do in a condition of scarcity.  Scarcity occurs because people have unlimited wants but only have limited resources with which to fulfill these wants.  This means that people have to make economic decisions because they want more things than they can actually get.  Therefore, they have to choose between various options.

An individual person has to make economic decisions. You might have to decide which pair of jeans to buy, or how many pairs of jeans to buy as opposed to how many shirts. You may have to decide whether you will go to a university or whether you will go straight into the labor force. You may have to decide whether you should buy the newest mobile phone or keep your old one a while longer.

Families have to make essentially the same kinds of decisions.  A family might have to decide how many pants and shirts their children need.  They might have to decide how often (if at all) they can go on vacation. If they decide they can go on vacation, they will have to decide where they want to go and how much they want to spend on souvenirs while they are there.  They may have to decide what car they can afford and when to replace it with a new one.

Countries have to make bigger decisions. They have to decide what level of taxation they will impose on various types of economic activities. They have to decide how much they will spend on their military as opposed to domestic programs. They may have to decide what economic activities they want to subsidize.

All of these are decisions that have to be made because people (as individuals or as groups of people) want many more things than they can have and therefore must choose between various alternatives.

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