FrontPage: What value would you put on a human life? The Last Word: Ch1 Reviewing Key Concepts due next Tuesday Ch 1 quiz next Tuesday

Economics Chapter 1, Section 2 …Or, how many jalapenos on your nachos?

 Utility - The satisfaction one receives from the consumption of a good or service.  Margin, Marginal – an additional unit of something  Economists are often concerned with the effect of adding something “at the margin”, or the “marginal cost” of something  Margins are the “edge” of something (paper); we are pushing out the “edges” to see what happens

 On your chart, keep track of how our test subject feels about eating each marshmallow…

 We’ve seen how the benefit of eating one more marshmallow does not always increase, but actually decreases after a certain time  This is based on the law of diminishing marginal utility..we’ll come back to it later  How does this impact the choices that businesses make, such as hiring employees, for example?

 Land – the “factory floor”  Remains fixed in size  Capital – the scissors, paper and staplers  Remains fixed in number  Labor – you  How does productivity change as we add more workers?  Keep track on your chart… # of worker s Total Product Marginal Product (diff between last and next product) Benefit?

 Marginal cost – the cost of adding one more unit of something  Marginal benefit – the benefit of adding one more unit of something  Principle: As long as the marginal benefit of an activity exceeds the marginal cost, people are better off doing more of it.  When the marginal cost exceeds the marginal benefit, they are actually better off doing less of it.

 An analysis of the cost/benefit of adding one more unit of something ▪ Similar to the idea of “cost/benefit” analysis…  Marginal analysis helps people to make more informed decisions.  Those who do not use marginal analysis are likely to reduce the total benefits available from the choices made.  In the whole economy, a lack of marginal decision making reduces income and growth.  It is helpful when making a decision (as an individual or a business) to do a marginal analysis of any situation to see what doing just one more of something will give you…  Additional benefit, or just more cost?

 The Value of a Human Life