Economic decisions Economic decision is where an individual is faced with options and chooses one course of action. Factors influencing economic decisions: Factors influencing economic decisions of households: 1. Personal choice - a desire for a product that is acted upon. 2. Size of income - growing income allows you to purchase more and vice versa 3. bandwagon effect - some people might buy an item because everyone is buying it 4. Type of work 5. Level of education - this influence the type of items we like to own such as books or laptops 6. Rate of interest - if the rate of interest offer by bank is high, then individuals will tend to save more 7. Climate and weather conditions - the weather will affect economic decisions of households, as it has a direct influence on comfort and safety Factors influencing firm’s economic decisions: 1. Cost of production - increasing costs can reduce a firm’s output, unless the prospect for profits are high. 2. Profits - supernormal profit is the excess of total revenue over total costs 3. Resource base - is the quality and type of resources available to a firm 4. Industrial relations - the relationship between the management of a firm and the workers. 5. Changing demand - if a firm is faced with fallen demand for the good it produces, the firm will make a decision to cut back on production. If there is an increase, then they will produce more Factors influencing government's economic decisions:. 1. Laws and grants - to induce firms to locate in a particular region of the country. 2. Taxes - on the production and consumption of goods that impose a cost on society. 3. Setting up of infrastructural zones - to encourage and facilitate the activities of firms. 4. Provision of infrastructure - such as roads and bridges 5. General laws - to direct firm's’ activities. 6. Laws concerning the employment of disabled persons - there should not be any discrimination of persons who are disabled who wants to work.