1) Explain, using words and a diagram linked to those words, when appropriate: a) What marginal benefits are Marginal benefits are the satisfaction, profit, advantage gained by acquiring or consuming an additional unit, one more dollar, one more hour. b) What marginal costs are Marginal costs are the lost satisfaction, lost profit, the price paid, if you acquire or consume one more hour, one more unit, or one more dollar. c) the marginal benefits = marginal costs rule of economic decision making. The fundamental rules of economic decision making is always acquiring or consuming one more unit, one more hour or dollar if and only if the marginal benefit from doing something exceeds the marginal cost of doing so. Moreover, if the marginal cost …show more content…
Of course, the premise is based on the assumption that the individual is rationale and he/she will pay up to, but never any more than the extra satisfaction/benefit he/she gets from one additional unit. A market demand curve is a representation of the combined marginal benefit curves of a number of buyers fro purchasing additional units per a period at various prices. This curve represents all the buyers that are willing and able to purchase at a specific time. The law of demand states, as the price of a good or service increases, buyer’s demand for the good or services will decrease. Conversely, as the price of a good or service decreases, the buyer’s demand for this good or service will increase. Keep in mind, that all other factors must remain equal, which means there is no change in buyer tastes, in income or prices of similar goods. For example, pants go on sale at Kohl’s; you might by three instead of one. The quantity that I demanded increases because the price has
The graph above and off to the right represents the demand and marginal cost for a firm. In the retail market, they have control over the price at which they sell their products to consumers. In the article they state that the firms buy the pecans from wholesale markets for a small price, like eighty-five cents, and then they go off and sell the same pecans for $5.50. A decrease in the price causes a decrease in marginal cost.
In general, the reading and the AP textbook both contained the same economic concepts, but they sometimes used different terminology and economic models to explain them. One similarity was the concept that ‘everything is scarce and that all individual and firms seek to maximize their utility and benefits. Unit 3 started with an interesting historical overview of workdays and how it had decreased throughout the world due to technological factors and norms. The highlight of the Unit was explaining the interrelation between the concept of utility maximization and the feasible frontier, rather than separately. It explains how we can determine a person’s preferences of how much hours they want to work (or study) simply by setting the marginal
As a college student, you are required to make decisions all the time. These decisions differ in there level of seriousness and way it can affect you as an individual and how they may affect your academic performance. I came to college as an athlete, and my choice to be a college athlete meant my life would be different from traditional students. The rigor of my sport meant i would have weights every morning, and practice in the afternoons. It meant I would have to miss class to travel for games but that is what I signed up for.
In market choice consumers carry the power. Consumers demand products through their willingness and ability to purchase products. As a result of their demand, firms supply or produce goods to satisfy consumers. Both supply and demand can be graphed on supply and demand curves with price as the independent variable and quantity as the dependent variable. The demand curve follows a negative slope, so as the quantity demanded increases price decreases. The supply curve follows an opposite, positive curve, as the quantity supplied increases, so does the price. Looking at both on the same axis we can recognize how supply and demand relate. To see the supply and demand curves for a product, we would look at the quantity supplied verses the quantity
Unlike Cost Disease, the cost when regarding Revenue Theory of Cost is not focused technological progressions or the standard of living. It is, however, focused on the revenue available for education that can be raised for each student attending college. Technology and the standard of living only influence the cost per student only if they influence those who control revenues and enrollments. This is called the Revenue Theory of Cost because universities see the quality and cost relationship as a limitation, and they try to get past this limitation and get more revenue for the students to get to the path to higher quality. It is known that universities spend all the money they are given. There are public restraints, such as health care or K-12 education, which keeps universities from wasteful overspending. Bowen explains that he expects colleges and universities to do everything they can to get past the constraint that revenue has on costs. Quality comes into play such that some think raising prices might decrease the amount of high quality students and would harm the overall quality of the college or university. Bowen states that “an institution can maximize quality or it can maximize revenue. It cannot do both.” Although maximization in quality usually trumps the maximization of revenue in terms of the cost of tuition. It is also said that the only way to control the institutions is to control their revenue (Archibald and
Marginal cost (benefit) is the change in total cost (benefit) caused by an incremental change in the level of activity (Thomas & Maurice, 2012, pp. 95). In these definitions incremental is referring to small change relative to the total level of activity. Marginal cost is representative of the slope of the total cost curve and marginal benefit is the slope of the total benefit curve. The intersection of these two lines on a graph represent the point where the net benefit is maximized, or the optimal level of
Utilitarianism is an ethical theory in which determining the rightness or wrongness of action or decision is based on determining whether the greatest benefit or happiness will be provided in the highest or greatest number of population. This simply means that action or decision must be based on the highest amount or number of beneficiary (Martineau, 2006). However, this ethical theory has two major types. First is the “act utilitarianism” and second is the “rule utilitarianism.” Act utilitarianism specifically adh...
Demand is where the price is not the factor which will shift the demand curve to the left or right. There is no movement along the demand curve as the price remains the same even though there is a shift in demand. Change in demand is represented by the shift of the demand curve.
Term “marginal” is extensively used and known with reference to the economics which means “extra”, whereas with economic view point the marginal cost is the cost of producing every extra unit; however the accounting terminology of “marginal” defines the cost incurred on production other than its fixed cost is the marginal cost. Simply, none of the technique is applied unless it serves the benefits and the marginal costing is used by the firms for its registered benefits. Among all its benefits the primary advantage it serves is its attempt to distinguish the fixed and variable costs, and the method only considers the related variable costs to be included in production cost and the fixed costs are thus later deducted out for ascertaining net profit. The inventory at the year-end is also valued on the bases of variable cost. With all these beneficial characteristics of the said system firms using marginal costing are clearly aware of its ...
Cost-benefit analysis is an economic approach decision making that compares the strengths and weaknesses of each choice in order to determine which option will provide the most amount of benefits and the least amount of costs. This method is often applied to decisions that concern the environment as an attempt to determine the value of the environment before following through with decisions to preserve or utilize the environment for resources. Although many economists believe that cost-benefit analysis is an efficient way to make most decisions, some philosophers suggest that certain things, including the environment, have innumerable values, therefore, cost-benefit analysis may not be a reliable method to make decisions regarding these things.
Average revenue is one of those trends, which refers to the income generated per unit of output sold. Average revenue can be obtained by diving the total revenue by the quantity sold. For example, if a business sells 160 baseball caps and its total revenue is 320 dollars, then the business average revenue is ($320 divided by 160 baseball caps) two dollars per baseball cap. Another term is marginal revenue, which refers to the additional income generated from the sale of an additional unit of output. For example, using the same baseball caps example, with the exception that one more baseball cap is sold. So total revenue is $320 when 160 baseball caps are sold; however, when one more baseball cap is sold, the total revenue is $322 when 161caps are sold. Therefore, the marginal revenue is $2, which is the additional income received for that additional product sold. In other words, the average revenue assist businesses in determining a firm’s profit per unit, while marginal revenue shines a light on the correlation between the number of units sold and the total
A single firm or company is a producer, all the producers in the market form and industry, and the people places and consumers that an Industry plans to sell their goods is the market. So supply is simply the amount of goods producers, or an industry is willing to sell at a specific prices in a specific time. Subsequently there is a law of supply that reflects a direct relationship between price and quantity supplied. All else being equal the quantity supplied of an item increases as the price of that item increases. Supply curve represents the relationship between the price of the item and the quantity supplied. The Quantity supplied in a market is just the amount that firms are willing to produce and sell now.
Figure I I .4 illustrates the effects of an increase in demand. OD is the original demand curve so that the equilibrium price is P and quantity Q is demanded and supplied.
The market price of a good is determined by both the supply and demand for it. In the world today supply and demand is perhaps one of the most fundamental principles that exists for economics and the backbone of a market economy. Supply is represented by how much the market can offer. The quantity supplied refers to the amount of a certain good that producers are willing to supply for a certain demand price. What determines this interconnection is how much of a good or service is supplied to the market or otherwise known as the supply relationship or supply schedule which is graphically represented by the supply curve. In demand the schedule is depicted graphically as the demand curve which represents the amount of goods that buyers are willing and able to purchase at various prices, assuming all other non-price factors remain the same. The demand curve is almost always represented as downwards-sloping, meaning that as price decreases, consumers will buy more of the good. Just as the supply curves reflect marginal cost curves, demand curves can be described as marginal utility curves. The main determinants of individual demand are the price of the good, level of income, personal tastes, the population, government policies, the price of substitute goods, and the price of complementary goods.
That is, it is sensitive to price change, and also to the quantity demanded. This means that if many people are consuming a good, the demand is greater than if less people are consuming the good. To further clarify, take the example of attending college. In an environment where most of an individual's peers are going to attend college, the individual will see college as the right thing to do, and also attend college to be like his peers. However, in an environment where most of an individual's peers are not going to attend college, the individual will have a decreased demand for college, and is unlikely to attend.