CAS EC 101 Lecture Notes - Marginal Utility, Marginal Cost, Opportunity Cost

• School: Boston University
• Department: Economics
• Course: CAS EC 101

Document Summary

So far we"ve covered 3 useful principles: think about the goods (not the money, everything has a cost (opp. cost) **, people respond to incentives -- sometimes in unexpected ways. Three more principles of economic thinking: when deciding how many think at the margin. The marginal unit is a unit you might add to units that you already have. The 5th apple is the marginal unit. Marginal benefit is the benefit provided by the marginal unit. Marginal cost is the opportunity cost of the marginal unit. When deciding how many units to buy, sell, or use, marginal benefits and marginal costs should be compared. The marginal benefit of the last unit you buy should be at least as great as the marginal cost. But they do not have to be equal. If the benefit is less than the marginal cost, forget it. I get worth of pleasure (benefit) from 4 slices. You need to think at the margin.