Decision Making

Decision Making

• Get into groups of three and determine a solution to one of the three scenarios.

Decision Making

12,486,344 – 11,432,997 = ?

Decision Making

_________

Basic Economic Principles

• People choose because of __________ resources. • People’s choices involve ________. • People respond to ___________ in predictable ways. • People create economic systems that __________

individual choices and incentives.• People ________ when they trade voluntarily.• People’s choices have _______________ that lie in

the future.

The Decision Making Process

• ___________ the problem

• ________ information and list possible alternatives

• __________ consequences of each alternative

• ___________ the best course of action

• ____________ the results

The Decision Making Process• Step 1: _________ the Problem

Understand the decision What are you really deciding?

To buy a car?

Which car to buy?

WRITE IT DOWN Consider all the facts Know who else is involved

The Decision Making Process• Step 2: ________ Information and

List Alternatives Don’t limit yourself to just one

or two. Think of all possibilities Ask others for suggestions WRITE THEM DOWN!

The Decision Making Process• STEP 3: ________ the

Consequences of Each Alternative

What are the positive consequences from What are the positive consequences from each option?each option?

What are the negative consequences from What are the negative consequences from each option?each option?

WRITE THEM DOWN!WRITE THEM DOWN!

The Decision Making Process• STEP 4: ________ the Best

Course of Action and Act Choose the course of action that bests fits with the

consequences you want and goes along with your values. Values: beliefs you feel strongly about that guide the way you live What is most important to you?

Even if your choice isn’t perfect it should feel comfortable. If none of your choices satisfy you then go back to step 2.

The Decision Making Process

• STEP 5: __________ the Results Evaluate the results. WRITE IT DOWN!! What were the positive results? Were there negative results? Were there any unexpected outcomes? Was there anything you could have done differently? If the outcome was not as successful as you would have liked

then try again.

Decision Making

• Get back into your groups of three and determine a solution to one of the three scenarios using the second T-chart and the full Decision Making Process worksheet.

• How did the decision making process change after learning the five step process?

Decision Making

• In the same groups but with a different more complex scenario, determine a solution to one of the following scenarios.

Factors that canInfluence a Decision

A. _________What is important to your family, others in your culture?

B. _________People you knowPressure for positive or negative behaviors

C. __________You are accustomed to doing it this way

D. ______________________________________________- If you do make a certain decision If you don’t make a certain decision

E. __________ Your family’s preference Decisions other family members have made

F. _______________________ What (or how much) you stand to win What (or how much) you stand to lose

G. ________ Minor Adult

Factors that canFactors that canInfluence a Decision Influence a Decision

Common Decision-Making Strategies

_______________Choosing the first option that comes to mind; giving little or no consideration to the consequences of the choice.

_______________Going along with family, school, work, or peer expectations.

________________Postponing thought and action until options are limited.

Common Decision-Making Strategies

____________Accumulating so much information that analyzing the options becomes overwhelming.

_____________Choosing an option that will be both intellectually and emotionally satisfying.

_____________Choosing the option that might achieve the best result, regardless of the risk involved.

____________Choosing the option that is most likely to avoid the worst

possible result.

____________Choosing the option that will bring some success, offend the

fewest people, and pose the least risk.

_____________Choosing the option that has a good chance to succeed and

which you like the best.

Common Decision-Making Common Decision-Making StrategiesStrategies

Decision Making Strategies

http://www.youtube.com/watch?v=1t6d3r0a27o

Judge Judy’s Advice

T-ChartPros Cons

Using a T-chart to list pros and cons related to decisions can help make the

decision making process simple.

Choosing Brand Name Jeans Over No-Name Jeans

ProsPros ConsCons

Better Fit Cost More

Popular people will notice me.

I will look just like everyone

else.Feel better

about myself.I can only afford one

pair.

Economic Influences on Decision-Making

_________________changes in the buying power of the dollar, inflation

__________________demand for goods and services

____________________________total value of goods and services produced within the country

________________the number of new homes being built

These economic factors may influence personal and financial decisions:These economic factors may influence personal and financial decisions:

Economic Influences on Decision-Making

________________the cost of borrowing money

________________funds available for spending in the economy

________________(such as the Dow Jones Averages, Standard & Poor’s 500)indicate general trends in the value of U.S. stocks

________________the number of people without employment who are willing to work

These economic factors may influence personal and financial decisions:These economic factors may influence personal and financial decisions:

Risks Associated with Decision-Making

_________________factors that may create a less than desirable situation. Personal risk may be in the form of inconvenience, embarrassment, safety, orhealth concerns.

_________________rising prices cause lower buying power. Buying an item later may mean a higher price.

_________________changing interest rates affect your costs (when borrowing) and your benefits (when saving or investing).

Risks are associated with every decision. The following are common risks related to Risks are associated with every decision. The following are common risks related to personal and financial decision making:personal and financial decision making:

Risks Associated with Decision-MakingRisks are associated with every decision. The following are common risks related to Risks are associated with every decision. The following are common risks related to personal and financial decision making:personal and financial decision making:

____________________________changing jobs or reduced spending by consumers can changing jobs or reduced spending by consumers can result in a lower income or loss of one’s employment. result in a lower income or loss of one’s employment. Career changes or job loss can result in a lower income Career changes or job loss can result in a lower income and reduced buying power.and reduced buying power.

____________________________certain types of savings (certificates of deposit) and certain types of savings (certificates of deposit) and investments (real estate) may be difficult to convert to investments (real estate) may be difficult to convert to cash quickly.cash quickly.

Opportunity Costs__________________refers to what a person gives up when a decision is made. This cost, also called a trade-off, may involve one or more of your resources (time, money, and effort).

___________________________may involve time, health, or energy. For example, time spent on studying usually means lost time for leisure or working. However, this trade-off may be appropriate since your learning and grades will likely improve.

____________________________involve monetary values of decisions made. For example, the purchase of an item with money from your savings means you will no longer obtain interest on those funds.

Time Value of Money

___________________can be used to measure financial opportunity costs using interest calculations.

For example: spending $1,000 from a savings account paying 4% a year means an opportunity cost of $40 in lost interest.

Calculations: $1,000 x .04 (4%) x 1 year = $40

Over 10 years, that $40 a year (saved at 4%) would have a value of $480 when taking into account compound interest.

Forms of Peer Pressure as it Relates to Purchasing Decisions

• Friends• Newspapers• Magazines• Telephone

Directories

• Direct Mail• Commercials• Catalogs• Radio

Advertisements

Emotional Factors Related to Peer Pressure

• Gossip• Acceptance• Disapproval• Insecurities• Boyfriend/Girlfriend• Sarcasm

• Fear• Clubs• Athletics• Cliques• Rich/Poor

Marketing, Advertising & Sales Strategies

• People who sell products and services are fishing for customers. They lure them in with sales, coupons, and other enticements. Unlike fish, consumers can benefit in this situation – if they know how to take advantage of special purchasing opportunities.

Examples of Marketing, Advertising & Sales Strategies

• Clearance Sales• Holiday Sales• Coupons• Rebates• Sweepstakes• Contests• Sales People

• Attractive Décor• Background Music• Items purchased most

often are in back of store (bread/milk)

• Most profitable items are given prominent positions.

Ask About Ads

• Using the color print ad that you brought to class complete the Ask About Ads worksheet.