Cost & Benefits - They are the future.
Example: Let’s say you have a dollar.
( No cost or benefit) You exchange the dollar for a burger. (Still no cost or benefit) Why? Cost and benefit are both in the
future. You eat the burger and throw up(cost or benefit?) Depends on whether you wanted to throw up.
Marginal - One More Thing
Marginal Benefit - the increase of total benefits that results from producing,
purchasing, or consuming an additional units. (action)
Example: Marginal benefit of school is your education.
Marginal Cost - the increase in total cost that results from producing, purchasing,
or consuming in additional units.
Example: Someone offers you an item at a certain price. Then they increases
the quantity and the price gradually. It’ll continues until you stop. You decide your margins.
Law of Diminishing Marginal Productivity
With each step your return is smaller.
Example: At a buffet you start with a big plate with big proportions. Second
time around you still have the big plate, but with smaller proportions.
Once the marginal cost becomes greater than the marginal benefit you stop.
The point at which MB = MC
Examples to Think About:
1. Bombing during WWII - drop a bomb kill everyone, do you drop another? No.
2. Proof reading - Once you find all the mistakes you don’t look for more.
3. Insulation in the attic - You have to put in the right amount. Too little the home is
drafty, too much the home is hot, and some home products don’t work properly.