This document discusses how people make economic decisions based on rational choice theory. It uses the author's decision to purchase an AR15 rifle as an example. The author considered costs, benefits, and incentives in deciding between three options: buying the rifle assembled, building it themselves over 12 weeks for less money, or not purchasing it at all. They chose the second option as it provided the greatest marginal benefit for the cost. The document also briefly outlines the key principles of economics and different types of economies that influence decision making.

1. Running head: HOW PEOPLE MAKE ECONOMIC DECISIONS 1
How People Make Economic Decisions
Anthony "Tony" Cuomo
ECO/212 Principles of Economics
January 29th 2013
Robert Coates, MBA

2. HOW PEOPLE MAKE ECONOMIC DECISIONS 2
How People Make Economic Decisions
Economics is the study of the choices consumers, business managers, and government
officials make to attain their goals, given their scarce resources. Economists believe that all
people are rational and base their decisions on their individual needs and beliefs based on
scarcity. The basic principles of the decision making process are the incorporation of the three
keys of economics and the - who, what, and how of the production of goods and services.
The 3 keys of economics;
1. People are rational.
2. People respond to economic incentives.
3. Optimal decisions are made at the margin(Hubbard & O'Brien, 2013)
A recent decision I made was the purchase of an AR15 sporting rifle. This decision
incorporates a plethora of issues concerning my wants and desires, recent governmental
involvement, my belief in our constitutional rights, and how could I afford this item before it
becomes too expensive to purchase; let’s dive in.
I never thought to purchase such an item till just recently due to the totally bias and
personal agenda attacks on restricting my rights. Here’s why, as per the Center for Disease
Control (CDC) the number one cause of death in the United States (US) forthose under the age
of 25 is automobile accidents - not gun violence(CDC, 2011). As reported by the Bureau of
Justice Statistics in 2009 that gun violence was so low in the US that some figures had to be
denoted as zero, see chart (DOJ, 2010).

3. HOW PEOPLE MAKE ECONOMIC DECISIONS 3
90%
80%
70%
60% No Weapon
50% Firearm
Knife
40%
Other
30%
Unknown
20%
Don't Know
10%
0%
Violent Crime Rape/Sexual Robbery Aggravated
Assault Assault
After contacting the NRA the actual percentage of crimes committed in the US by
citizens that legally obtained the same types of rifles is .0165%, meaning that 99.9835% have
committed no crimes with their legally purchased firearms (Hardig, 2013). This proves that our
administration including such people as Mayor Bloomberg of New York and Sen. Feinstein of
California are on a personal agenda track.
My final decisionis to purchase this item, marginal benefit outweighing marginal cost.
Option one, buy a rifle off the shelf for $1800.00 plus tax and state fees and wait the mandatory
ten days. Option two, purchase the rifle in parts and build it in a 12 week time frame and spend
under $1000.00. Option three, do not buy the rifle. I chose option two to build my own;the
marginal benefit is greater than the cost. I will have an item worth more than I spent having a
positive return on investment (ROI). An incentive that may have swayed my decision of not
even purchasing this item is if the powers at be vowed to fight and harshly punish crimes
involving firearms and protect the rights of the majority that are not committing crimes.

4. HOW PEOPLE MAKE ECONOMIC DECISIONS 4
The principles of economy in the decision making process for the entire economy provide
a road map not the outcome. Economists take in as many variables as they can to build
economic models to reach the best results. There are three defined economies all with attributes:
a centrally planned economy, a market economy, and a mixed economy. In a centrally planned
economy most goods and services are provided by the government at no cost. In a market
economy individuals can work for or open a business to generate income to buy what they want.
A mixed economy such as the US is that business is regulated by the government for
theprotection of the people. Since the US is a mixed economy, one can measure its economic
interaction by monitoring the Gross Domestic Product (GDP).
To conclude, economics is not an exact science, it is a tool to be used to reach the best
outcome. Economists build models from past and current data to predict positive future
outcomes or trends.

5. HOW PEOPLE MAKE ECONOMIC DECISIONS 5
References
Bureau of Justice Statistics (DOJ).(2010). Weapon Use by Offence Type. Retrieved from
http://bjs.ojp.usdoj.gov/index.cfm?ty=tp&tid=43
Center for Disease Control and Prevention (CDC).(2011). 10 Leading Causes of Injury Deaths
by Age Group. Retrieved from
http://www.cdc.gov/injury/wisqars/pdf/10LCID_Unintentional_Deaths_2010-a.pdf
Hardig, J (2013, January) Telephone Interview NRA Headquarters
Hubbard, R. G., & O'Brien, A. P. (2013).Economics (4th ed.). Upper Saddle River, NJ: Pearson
Education Inc.