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Chapter 1: Problem 13

Economists say that individuals make decisions at the mat gin. What does this mean?

Short Answer

Expert verified
Making decisions 'at the margin' refers to the practice of considering whether the benefit of one more incremental unit of consumption, production, or purchase is greater than its cost. This allows individuals, businesses, and governments to make decisions based on incremental changes, promoting efficiency and optimization.

Step by step solution

01

Understanding the Concept

To answer this question, one needs to first understand the main concept, which is 'making decisions at the margin' in Economics. It involves the consideration of incremental costs and benefits. This concept is fundamental in economics and embodies the idea of analyzing costs and benefits concerning the incremental or marginal changes.
02

Explaining the Meaning

In the context of decision-making, the term 'at the margin' implies that decisions are made based on the consideration of small, or marginal, changes. Economists use this concept to explain how individuals, firms, and even governments make decisions 'at the margin,' where the benefits of an additional action are weighed against the potential costs.
03

Demonstrating Application

When decision mechanisms are set up at the margin, it allows for changes to be made incrementally, thus allowing for greater efficiency and optimization. For instance, a business owner might evaluate the marginal profit or benefit obtained from producing one additional unit of a product and compare it to the marginal cost. If the marginal benefit exceeds the marginal cost, the owner may decide to produce that extra unit. If not, the owner may halt production.

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Most popular questions from this chapter

If you found \(\$ 10\) bills on the sidewalk regularly, we might conclude that individuals don't try to maximize net benefits. Do you agree or disagree with this statement. Explain your answer.

A change in \(X\) will lead to a change in \(Y .\) The predicted change is desirable, so we should change \(X .\) Do you agree or disagree? Explain.

Can either scarcity or one of the effects of scarcity be found in a car dealership? Explain your answer.

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Give an example of something that is a good for one person and a bad for someone else.
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