Marginal Cost Essay

1579 Words7 Pages
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
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