Overview

Consumers have limited means available to them (time, skills and money) to satisfy their needs and unlimited wants. They must use some means to satisfy their needs, which are essential to survival. However, with scarcity and limited means, consumers must choose how they will use their remaining means to satisfy their remaining needs through a decision making process. Their decision will be influenced by tastes and preferences, personal values and the means available to them. Consequences of the decision will include the next best alternative foregone, known as the opportunity cost.

Decision-Making

Identifying the best alternative can be done immediately for very minor choices, but there are many choices that will have huge consequences and an informed wise choice must be made.

There are seven steps in the decision-making model. There are:

• Aim: Identifying the goal or decision that must be made.
  
• Obstacles: Identifying the obstacles or difficulties that may prevent an informed wise decision being made. Lack of information is a very common and significant obstacle in most decisions.
  
• Options: Identifying the possible alternatives available that may be chosen.
  
• Advantages and Disadvantages: Identifying the advantages and disadvantages of each alternative listed.
  
• Ranking: Ranking all alternatives in order of preference from most favorable to the least favorable in consideration of the advantages and disadvantages of each alternative and the obstacles that have been identified.
  
• Reasoning: Identifying the highest-ranking alternative and reasoning this ranking, with reference to the advantages and disadvantages of each alternative that have previously been identified.
  
• Consequences: Evaluating the consequences of choosing that alternative. Consequences include:
  

  The opportunity cost (the alternative with second-highest ranking).
  

  The things that will need to be done as a result of making the decision
  

  The effect the decision will have on other people.