Decision making unit
Topic: Scarcity, Choice and Economic Systems · NCERT: Class 12, Ch 1 "Introduction (Microeconomics)"
Meaning
A decision-making unit is anyone who takes an economic decision. It can be a single person, or a group that decides as one, such as a household, a firm or any other organisation. Economics studies how these units choose under scarcity, for example what to buy, what to produce and how much to save. Treating a group as one unit keeps the analysis simple.
Example
A household in Chennai decides together whether to spend ₹50,000 on a new fridge or on a child's coaching fees. Here the whole household is one decision-making unit. A textile firm deciding how many workers to hire is another.
Don't confuse with
- Economic agents: the two ideas overlap closely. "Economic agents" is usually used for the main actors in an economy (consumers, producers, government, banks). "Decision-making unit" stresses that one unit can be either a person or a group.