Micro Chapter 2 Lecture Notes.docx

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Department
Economics
Course
ECON 1010
Professor
John Brock
Semester
Spring

Description
ECON 1010 Lecture Notes Chapter 2 People Think at the Margin Drive Up ATM Example -Why would drive up ATMs have braille dots? -It would be inefficient for a company to have to make two sets of patterns for ATMs so they just put the dots on both walk up ATMs and drive up. -The costs outweigh the benefits because sighted people wouldn’t benefit from not having the dots present. -Marginal Benefit -The added benefit that comes from choosing one more unit. -Mathematically: Marginal Benefit = (Change in total benefit)/(change in quantity) -Marginal Cost -The added cost of on more unit. -Mathematically: MC = (Change in total cost)/(change in quantity) Item Number Marginal Benefit Total Benefit Average Benefit Marginal Cost 1 $0.25 $0.25 $0.25 $0.09 2 $0.15 $0.40 $0.20 $0.09 3 $0.10 $0.50 $0.167 $0.09 4 $0.05 $0.55 $0.138 $0.09 5 $0.00 $0.55 $0.11 $0.09 As the number of a certain item increases, call them pieces of candy, the marginal benefit decreases. In other words, as you eat each piece of candy, the next piece is less desirable and therefore worth less to you. The total benefit increases by the amount that the piece of candy was worth to you and you gain no value after you feel it is worth nothing. When the marginal cost is set at 9 cents as it is here, you would choose to stop after your third piece of candy because the cost outweighs the benefit of attaini
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