Why do economic decisions vary from person to person even under the same circumstances?

• A. Because economic decisions are determined solely by government policies
• B. Because market prices eliminate all differences in individual choices
• C. Because all individuals always have identical preferences and information
• D. Because individuals have different incentives and respond to them in unique ways

Answer: (D)

Verified step by step guidance

1. Understand that economic decisions are influenced by individual preferences, incentives, and available information, which can vary widely among people.
2. Recognize that government policies and market prices do affect decisions but do not fully determine them, as individuals interpret and respond to these factors differently.
3. Recall that identical preferences and information across all individuals are unrealistic; people have diverse tastes, goals, and knowledge.
4. Focus on the concept of incentives: these are factors that motivate individuals to make certain choices, and since incentives differ for each person, their decisions will also differ.
5. Conclude that the variation in economic decisions arises because individuals face different incentives and respond uniquely based on their personal circumstances and preferences.