the concept of the margin

• Thinking at the margin


  Thinking about the effect of an additional action
• Marginal increase in product or marginal cost

  1. Working for one extra hour could produce 6 more units of output

  2. Each extra unit of output costs 10 minutes
• Marginal cost


  10 minutes
• Marginal utility of (X)


  Total utility of (Xn+1) - Total utility of (Xn)
• Thinking at the margin

  • Prevents consumers thinking about things they have already done
  • Allows them to consider how to maximise their utility now or in the future
• Margins


  • Can increase productivity
  • The most important tasks which maximise utility the most, are the ones which are prioritised
• Marginal utility


  The extra satisfaction derived from consuming one extra unit of the good
• Demand curve is downward sloping


  Because of diminishing marginal utility
• Law of diminishing marginal utility

  • Consumer surplus generally declines with extra units consumed
  • The extra unit generates less utility than the one already consumed
  • Consumers are willing to pay less for extra units