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Marginal Analysis

The document discusses the concept of marginal analysis and how it can be used to determine how much is too much in different scenarios involving exercise, work, studying, and production of toothbrushes. Marginal analysis examines the incremental costs and benefits of small changes in activity levels to help make economic decisions about when returns start decreasing for additional units of output. The examples provided are intended to illustrate how to use marginal analysis to identify the point where costs begin to outweigh benefits for different activities.

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Rashe Fasi
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102 views6 pages

Marginal Analysis

The document discusses the concept of marginal analysis and how it can be used to determine how much is too much in different scenarios involving exercise, work, studying, and production of toothbrushes. Marginal analysis examines the incremental costs and benefits of small changes in activity levels to help make economic decisions about when returns start decreasing for additional units of output. The examples provided are intended to illustrate how to use marginal analysis to identify the point where costs begin to outweigh benefits for different activities.

Uploaded by

Rashe Fasi
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPT, PDF, TXT or read online on Scribd
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Marginal Analysis—How much

is too much?
In the following scenarios explain the course of action you would take and be
able to assert why…
•You and your friend exercise for the upcoming Spring sport season 3 days a
week. Your friend suggests that you up the days of exercise to 5. How much is
too much exercise?
•You greatly enjoy the benefits you get from working 32 hours a week. In order
to try and increase those benefits, you are thinking about increasing those
hours to 50 per week. How much work is too much work?
•Succeeding in school is your #1 priority. From the minute you get home to 9
o’ clock you focus on studying for upcoming tests/completing homework.
How much studying is too much studying?
•You are the manager of a factory producing toothbrushes for the state of
Pennsylvania. Every toothbrush costs you $1.00 to produce and you can sell
each toothbrush for $2.50 on the first 10,000 toothbrushes. For every
toothbrush you produce after that, it costs you $1.75 to produce, yet the
demand for your product will decrease indefinitely for every toothbrush after
the first 10,000. How many toothbrushes are too many toothbrushes ?
Explanation
• A way to examine economic decision making…
• The process of identifying the benefits and costs of
different alternatives by examining the incremental effect
on total revenue and total cost caused by a very small (just
one unit) change in the output or input of each alternative.
Marginal analysis supports decision-making based on
marginal or incremental changes to resources instead of
one based on totals or averages.

• What do you gain in taking this action vs. a different


action? To what degree will you act vs. when is enough,
enough?
• Exercise, work, study, production examples…
– All have a cost, benefit, and alternative (opportunity cost
measurement)
In Business…
• When they produce…

• Decision making behind the scenes done


in a unit by unit basis…

• Reflects microeconomic perspective


– Average person, average day, in average
mood
Act…
• “Pollution” Scenario sheet…15 minutes to
complete
• Review together
Economic Incentives
• What are they?
• Where do you see them?
• Why do they matter?

• http://www.youtube.com/watch?
v=gF2mKIP9WnI
– Where is the incentive?
Emerging in the Workplace
• Huge business reasons to examine
incentives…

http://www.youtube.com/watch?
v=oUWGFEKgjaY

Is an incentive more powerful than the work


itself?

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