Lessons 17 · 1 lessons · E. Sariqov, B. Khaydarov. Foundations of Economics, Grade 8. “Huquq va Jamiyat” Publishing House, Tashkent, 2019
17
Making economic decisions
Textbook: pp. 76–79
GoalKnows the five steps of economic decision-making (problem, alternatives, criteria, evaluation, choice), builds a decision table, and explains rationality, maximality and the private and social value of a decision.
New words
decision-making: choosing the best of the alternative solutions · qaror qabul qilishcriteria: the standards by which alternatives are judged · baholash mezonlarirationality: not wasting time, money or other resources when deciding · ratsionallikmaximality: picking the option that brings the most benefit · maksimallik
Explanation
Every day we choose, but a good decision is taken consciously, step by step. Step one is defining the problem (for example, which washing machine a family should buy). Step two is listing all alternative solutions. Step three is setting criteria: price, usefulness, fit to the need, effect on health. Step four is evaluating each solution against the criteria: in a table we put “+” if positive, “–” if negative, “0” if neutral, “?” if unknown. Step five is choosing the solution with the most positive marks. A good decision is rational – time, money and other resources are not wasted – and maximal, meaning it picks the option that brings the most benefit among those available. A decision affects both the individual (private value) and society (social value): for example, if a woman opens a sewing workshop in her village, she earns income, while her neighbours get jobs and a nearby place to have clothes made cheaply. When buying, also take hidden costs into account (the total payment if it is on instalments, service fees).
Worked examples
Aziza is thinking about spending 600 000 so‘m on a drawing course, a basketball or a new bag. Criteria: enough money, interest, health. Course: enough money (+), interested (+), no effect on health (0). Ball: enough money (+), interested (+), health benefit (+). Bag: enough money (+), not interested (–), health (0). The ball gets the most “+” marks.
A rational choice: trainers cost 450 000 so‘m and will probably last 3 years: 450 000 : 3 = 150 000 so‘m per year. Cheap trainers cost 220 000 so‘m and wear out in a year: 220 000 so‘m per year. Although the price is higher, the first is cheaper per year.
Class activity
“Decision table”: a group picks four alternatives and three criteria for 500 000 so‘m, fills in the table and justifies its choice to the class.
Practice
1
Write the five steps of decision-making in order.
Define the problem; find alternatives; set criteria; evaluate the solutions; choose the best.
2
Phone plan A: 60 000 so‘m, 8 GB; plan B: 90 000 so‘m, 15 GB. What is the price per 1 GB under plan B in so‘m?
6000
3
Boots cost 360 000 so‘m and last 4 years; another pair costs 140 000 so‘m and lasts 1 year. What is the yearly cost of the first pair in so‘m?
90000
4
A young man opened a bicycle repair workshop in his neighbourhood. Explain the private and the social value of this decision.
Private: the young man earns income and gains experience. Social: neighbours can get bicycles repaired without going far, and perhaps one more person gets a job.