Stacy L. McKee
March 25, 2013
Week #1 - Individual Assignment: Financial Concepts
Guillermo Navallez is challenged with a market changes that have occurred over the past couple of years. With the economic environment created by the new competition and increase in labor costs, he will need to apply principles of finance to determine the best course of action to allow his furniture store to survive. After review and thoughtful consideration Guillermo decided to use the following to determine the best course of action: The Principle of Self-Interest Behavior, the Signaling Principle, and The Principle of Comparative Advantage. Using the behavioral based principles, economics and psychology can be integrated to help in the decision making process. Likewise, expertise can be the basis for choices made. The Principle of Self-Interested Behavior
People generally, act in their own financial self-interest. The Principle of Self-Interested Behavior states that when all things are equal, parties involved will gravitate to the action that is most financially advantageous. A key concept with this principle is the idea of opportunity costs, or the difference between the value of one action and the value of best alternative (Emery, Finnerty, & Stowe, 2007). To maximize potential profits, Guillermo will want to review carefully the different options available. The development and review of anticipate financial results will help identify from a purely financial perspective. The Principle of Self-Interested Behavior would help Guillermo with his end decision, if his financial interest was the most important component. When considering his concern the effect that the decision will have on his family life, this principle will likely not be the guiding force in the decision he makes.
The Signaling Principle
The Signaling Principle is an extension of the Principle...