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.
-The added benefit that comes from choosing one more unit.
-Mathematically: Marginal Benefit = (Change in total benefit)/(change in quantity)
-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