ECON 200 Study Guide - Midterm Guide: Demand Curve, Perfect Competition, Berkeley, California
20 Sep 2016
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Purposefully behave in the way that will best achieve their goals, call rational behavior. Rational behavior suggests that people compare the additional benefits of a choice against the additional costs. Comparing additional benefits and costs of a choice is called marginal decision making or thinking at the margin. *the key is to try to maximize the difference between the total benefits and the total costs. Marginal changes are small incremental changes to a plan of action. Additional cost of producing one more gallon of gas gallon of gas. Additional cost of eliminating one more ton of pollutants more ton of pollutants. The value to you from owning one more. Individuals and firms can make better decisions by thinking at the margin. A rational decision maker continues to take an action if and only if the marginal benefit of the action is at least as large as the marginal cost.
