APP1_Patterson_M - additional unit of an activity. For an...

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Week 1 Application: Marginal Utility and Consumption Marc Patterson ECON-1001-1 Microeconomics Instructor Dr. Charles Smith Jr March 13, 2010 Week 1 Marginal Utility and Consumption 1
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Week 1 Application When asking yourself whether or not to do a certain activity or eat a certain amount of food, what you should really be asking yourself is whether or not you should do or eat more than you normally would. In order to make an informed decision, you must look at the cost of an additional unit of activity or an extra plate of food versus the benefit of adding that extra helping. For example, lets say I am going to the movies. A movie isn’t the same if you don’t get some popcorn to go along with it. This is where you must discuss the marginal cost, or the total increase in cost that results from carrying out one additional unit of an activity and the marginal benefit or the total increase in benefits that result from carrying out one
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Unformatted text preview: additional unit of an activity. For an extra bucket of popcorn at the movies, the marginal cost seems to be zero, considering that refills are free. And also, the popcorn tastes good, so the benefit goes up. However, if you look a bit closer, eating an extra bucket is unhealthy so therefore the cost goes up and the benefit goes down. A good example of a marginal utility increase is probably exercise. The marginal cost for an extra set of exercises is very low. For example, a person might be a little bit sore the next day. In addition, the marginal benefit is very high. An extra set of exercise is good for a person. Therefore, since an ideal situation is low marginal cost versus high marginal benefits, exercise is a perfect example. Week 1 Marginal Utility and Consumption 2 Week 1 Marginal Utility and Consumption 3...
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APP1_Patterson_M - additional unit of an activity. For an...

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