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Economic Decision


Investigate the complexity of the economic problem and apply economic decision-making tools and processes to deal with the problem

Course Overview

Topic 4 Goals

  • Define and explain what economic decision making is
  • Identify and explain the steps of making economic decisions
  • Identify and explain how decisions are made in the allocation of resources
  • Identify and explain the importance and potential of PNG tourism

Course Content

6 Lessons 6h 40m

    Economic decision making is very important because:

    • It assists in the efficiency allocation and use of resources
    • Reduces wastage of resources
    • Assists in aiming for maximum benefits from resources
    • Assists in aiming for minimum costs from resources
      Effective economic decision-making steps help answer the following questions:
    • What do we produce?
    • How much do we produce?
    • How do we produce it?
    • Who do we produce it for?
    The steps include:

    Identifying, describing, and defining the problem

    Identifying the cause of the problem

    Researching and identifying methods of solving the problem

    Listing them down in order of most to least appropriate

    Selecting best two alternatives and doing a cost-benefit analysis

    Making a final decision and applying the method to solve the problem

    For CASE STUDIES of India and Papua New Guinea Economic Systems and Tourism in PNG please go to the FODE Unit 11.1 Economics Textbook

    Economic decision making is very important because it:

    • Assists in allocation of resources to where it is most needed
    • Prevents wastage of resources
    • Assists in making efficient use of resources
    • Assists in bringing maximum benefit from the resources
    • A PPC is an economic model that shows the production ability of a firm in producing a combination of two alternative goods with a fixed amount of inputs

    The main application of the PPC model is to highlight some of the basic economic concerns of:

    • Choice and opportunity costs
    • The effects of unemployed and employed resources on potential output (production)
    • The effect of improved technology on output (production)

    Following the steps in making economic decisions is very important to achieve maximum satisfaction

    PNG’s economy includes a formal sector based on exports and natural resources and a large informal sector that relies heavily on subsistence farming and other economic activities.

    PNG is a free market economy mainly but with a larger portion of its population still reliant on subsistence farming and the government’s ownership of major infrastructures/services, it is seen as a mixed economy

    The allocation and distribution of resources is uneven and more of the population has missed out on government benefits