How does our behavior change at a buffet? Why?

Thinking at the Margin Marginal = The Extra Marginal changes are small, incremental adjustments to an existing plan of action. Marginal Benefit The extra benefit of one more unit Benefit will correlate with the value that we place on the product Value = How much something is worth Paradox of Value The contradiction between the high value nonessentials and low value of essentials What is the marginal benefit of running 1 extra mile? -marginal benefit of running one more mile after running the previous two miles could be the additional calories burned - marginal cost of running one more mile after running the previous two miles could be ten minutes of time one could have devoted to another pursuit such as studying for an exam

Thinking at the Margin Marginal Cost The extra cost of one more unit The decision to choose one alternative over another occurs when that alternative’s marginal benefits exceed its marginal costs! Individuals have an INCENTIVE to gain from a transaction. Hope of reward or fear of punishment that encourages people to behave in a certain way Marginal benefit needs to be greater than marginal cost If marginal benefit is greater then you should do it If marginal benefit is less than marginal cost then you should NOT do it Stop where MB = MC What about marginal cost of that extra mile?

How many workers should they hire? Why? Number of workers Total units produced Marginal number of units produced Price of each unit produced Total revenue for the Unites produced Marginal revenue for generated by each additional worker Marginal cost of hiring each additional worker ---------- $2.50 1 6 $15 $10 2 11 5 $27.50 $12.50 3 15 4 $37.50 18 $45 $7.50 20 $50 $5.00

Marginal number of units produced Price of each unit produced Number of workers Total units produced Marginal number of units produced Price of each unit produced Total revenue for the Unites produced Marginal revenue for generated by each additional worker Marginal cost of hiring each additional worker ---------- $2.50 1 6 $15 $10 2 11 5 $27.50 $12.50 3* 15 4 $37.50 18 3 $45 $7.50 20 $50 $5.00 Rational does not always mean money- more enjoyment to donate, etc.