Marginal Thinking
In economics, marginal thinking requires decision-makers to evaluate whether the benefit of one more unit of something is greater than its cost. This can be quite challenging, but understanding how to analyze decisions at the margin is essential to becoming a good economist.
Will This Decision Make Me Better or Worse Off?
REAL WORLD EXAMPLES
See more examples in the
Discounts on Two-Day Passes to Amusement Parks
The excitement on the first day is palpable. Running to rides, waiting in line, and experiencing the thrill for the first time.
Sure, you’d go back the next day but most of us are pretty exhausted so the price must be lower to entice us back.
Discounts on Season Tickets to Sporting Events and Concert Series
Over the course of any season there are games and concerts that are highly anticipated, and others that are less talked about.
In order to get someone to buy the entire season package the total price must be discounted.
All-You-Can-Eat Buffets
Buffets offer the promise of unlimited food, but the average diner has a limited capacity to exploit the situation. Eating more eventually leads to negative marginal utility.
Before that happens the rational consumer will stop eating.
Unlimited Night and Weekend Minutes on Cell Phone Plans
Cell phone companies rely on the diminishing marginal utility of conversation.
Customers grow tired of talking and eventually decide to do something else that gives them more utility.
