1 / 16

Marginal Analysis

Marginal Analysis. Marginal Analysis. IS ALL about making your final choice!. Economic Choice is really just a cost­-benefit model of how people make decisions. How much utility each decision would bring Determine the opportunity cost of each option

elvina
Download Presentation

Marginal Analysis

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Marginal Analysis

  2. Marginal Analysis IS ALL about making your final choice!

  3. Economic Choice is really just a cost­-benefit model of how people make decisions. • How much utility each decision would bring • Determine the opportunity cost of each option • choose the option for which the benefits outweigh the costs

  4. Concept is called Marginal Utility • Choices are not so much about whether to do something but instead how much.

  5. Example: • Remember: The amount of utility that a given thing brings usually depends on how much of that given thing a person has already had.

  6. This is demonstrating the law of diminishing marginal utility. Each additional, or marginal, piece of pizza brings less utility than the previous piece so that the marginal utility brought by each additional slice diminishes.

  7. Economists though presume that people faced with a limited budget is to adjust the quantities of each possible thing they can consume to maximize their total utility.

  8. Each person has different preferences and the quantities of each good will maximize each person’s total utility are different.

  9. Marginal Analysis

  10. Marginal Analysis IS ALL about making your final choice!

  11. Economic Choice is really just a cost­-benefit model of how people make decisions. • How much utility each decision would bring • Determine the opportunity cost of each option • choose the option for which the benefits outweigh the costs

  12. Concept is called Marginal Utility • Choices are not so much about whether to do something but instead how much.

  13. Remember: The amount of utility that a given thing brings usually depends on how much of that given thing a person has already had.

  14. This is demonstrating the law of diminishing marginal utility. Each additional, or marginal, piece of pizza brings less utility than the previous piece so that the marginal utility brought by each additional slice diminishes.

  15. Economists though presume that people faced with a limited budget is to adjust the quantities of each possible thing they can consume to maximize their total utility.

  16. Each person has different preferences and the quantities of each good will maximize each person’s total utility are different.

More Related