University:
University of New Haven
Course:
ECON-1133-06-F19 | Intro to Macroeconomics
Academic year:

2023
Views:

312

Pages:

1
Author:

zedpantagruel

The Marginal Principle: The Marginal Principle should be used when making numerical economic decisions. Decisions about quantities are best made incrementally. Marginal Benefit: The benefits you receive from having more of something. Marginal Cost: The cost that comes with having more of something. Ex. Say you have a restaurant and you’re deciding how many workers to hire. It’s easier to decide if you should hire “one more worker” than to immediately decide “how many workers should [you] hire?”. The benefits you’d receive from one more worker is the “marginal benefit” and the costs that that additional worker would bring is the “marginal cost”. The marginal cost should never exceed the marginal benefit. If the marginal benefit of having another of something exceeds the marginal cost, then an additional value will increase the economic surplus. Your economic surplus is maximized when you’re the closest you can possibly get to your marginal benefit and cost being equal. The Rational Rule: Keep going until the marginal benefit equals the marginal cost.

Intro to Macroeconomics - The Marginal Principle

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