INDIVIDUALS MAKE DECISIONS
THE MARGINS
INDIVIDUALS WILL CHOOSE THE OPTION THAT YIELDS THE GREATEST
NET MARGINAL BENEFIT.
LEARNING OBJECTIVE
APPLY THE CONCEPTS OF MARGINAL ANALYSIS AND UTILITY TO
DECISION-MAKING
KEY POINTS
• THE MARGINAL COST OR BENEFIT IS THE AMOUNT THAT A
DECISION WILL CHANGE THE TOTAL COST OR BENEFIT FROM
WHERE IT IS CURRENTLY.
• INDIVIDUALS WILL MAKE CHOICE THAT MAXIMIZES THE NET
MARGINAL BENEFIT (MARGINAL BENEFIT - MARGINAL COST).
• WHILE TOTAL OR AVERAGE COST AND BENEFIT ARE
IMPORTANT, PROVIDED ENOUGH RESOURCES, INDIVIDUALS
WILL LOOK ONLY AT THE NET MARGINAL BENEFIT.
KEY TERMS
(MARGINAL COST)
THE MARGINS
INDIVIDUALS WILL CHOOSE THE OPTION THAT YIELDS THE GREATEST
NET MARGINAL BENEFIT.
LEARNING OBJECTIVE
APPLY THE CONCEPTS OF MARGINAL ANALYSIS AND UTILITY TO
DECISION-MAKING
KEY POINTS
• THE MARGINAL COST OR BENEFIT IS THE AMOUNT THAT A
DECISION WILL CHANGE THE TOTAL COST OR BENEFIT FROM
WHERE IT IS CURRENTLY.
• INDIVIDUALS WILL MAKE CHOICE THAT MAXIMIZES THE NET
MARGINAL BENEFIT (MARGINAL BENEFIT - MARGINAL COST).
• WHILE TOTAL OR AVERAGE COST AND BENEFIT ARE
IMPORTANT, PROVIDED ENOUGH RESOURCES, INDIVIDUALS
WILL LOOK ONLY AT THE NET MARGINAL BENEFIT.
KEY TERMS
(MARGINAL COST)
