Marginal Analysis
description
Transcript of Marginal Analysis
![Page 1: Marginal Analysis](https://reader034.fdocuments.in/reader034/viewer/2022051421/5681613e550346895dd0a4b9/html5/thumbnails/1.jpg)
Marginal Analysis
![Page 2: Marginal Analysis](https://reader034.fdocuments.in/reader034/viewer/2022051421/5681613e550346895dd0a4b9/html5/thumbnails/2.jpg)
Marginal Analysis
IS ALL about making your
final choice!
![Page 3: Marginal Analysis](https://reader034.fdocuments.in/reader034/viewer/2022051421/5681613e550346895dd0a4b9/html5/thumbnails/3.jpg)
• Economic Choice is really just a cost -benefit model of how people make decisions.
1. How much utility each decision would bring2. Determine the opportunity cost of each
option3. choose the option for which the benefits
outweigh the costs
![Page 4: Marginal Analysis](https://reader034.fdocuments.in/reader034/viewer/2022051421/5681613e550346895dd0a4b9/html5/thumbnails/4.jpg)
• Concept is called Marginal Utility
• Choices are not so much about whether to do something but instead how much.
![Page 5: Marginal Analysis](https://reader034.fdocuments.in/reader034/viewer/2022051421/5681613e550346895dd0a4b9/html5/thumbnails/5.jpg)
• 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.
![Page 6: Marginal Analysis](https://reader034.fdocuments.in/reader034/viewer/2022051421/5681613e550346895dd0a4b9/html5/thumbnails/6.jpg)
• 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.
![Page 7: Marginal Analysis](https://reader034.fdocuments.in/reader034/viewer/2022051421/5681613e550346895dd0a4b9/html5/thumbnails/7.jpg)
• 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.
![Page 8: Marginal Analysis](https://reader034.fdocuments.in/reader034/viewer/2022051421/5681613e550346895dd0a4b9/html5/thumbnails/8.jpg)
• Each person has different preferences and the quantities of each good will maximize each person’s total utility are different.
![Page 9: Marginal Analysis](https://reader034.fdocuments.in/reader034/viewer/2022051421/5681613e550346895dd0a4b9/html5/thumbnails/9.jpg)
Marginal Analysis
![Page 10: Marginal Analysis](https://reader034.fdocuments.in/reader034/viewer/2022051421/5681613e550346895dd0a4b9/html5/thumbnails/10.jpg)
Marginal AnalysisIS ALL about making your final choice!
![Page 11: Marginal Analysis](https://reader034.fdocuments.in/reader034/viewer/2022051421/5681613e550346895dd0a4b9/html5/thumbnails/11.jpg)
• Economic Choice is really just a cost -benefit model of how people make decisions.
1. How much utility each decision would bring2. Determine the opportunity cost of each
option3. choose the option for which the benefits
outweigh the costs
![Page 12: Marginal Analysis](https://reader034.fdocuments.in/reader034/viewer/2022051421/5681613e550346895dd0a4b9/html5/thumbnails/12.jpg)
• Concept is called Marginal Utility
• Choices are not so much about whether to do something but instead how much.
![Page 13: Marginal Analysis](https://reader034.fdocuments.in/reader034/viewer/2022051421/5681613e550346895dd0a4b9/html5/thumbnails/13.jpg)
• Remember: The amount of utility that a given thing brings usually depends on how much of that given thing a person has already had.
![Page 14: Marginal Analysis](https://reader034.fdocuments.in/reader034/viewer/2022051421/5681613e550346895dd0a4b9/html5/thumbnails/14.jpg)
• 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.
![Page 15: Marginal Analysis](https://reader034.fdocuments.in/reader034/viewer/2022051421/5681613e550346895dd0a4b9/html5/thumbnails/15.jpg)
• 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.
![Page 16: Marginal Analysis](https://reader034.fdocuments.in/reader034/viewer/2022051421/5681613e550346895dd0a4b9/html5/thumbnails/16.jpg)
• Each person has different preferences and the quantities of each good will maximize each person’s total utility are different.