Question

In: Economics

Marginal analysis and decision-making: Concept: The Fundamental Assumption of Economics All social phenomena emerge from the...

Marginal analysis and decision-making:

Concept: The Fundamental Assumption of Economics

All social phenomena emerge from the actions and interactions of individuals who are gathering in response to expected marginal benefits and expected marginal costs to themselves.

Definition: Marginal is additional or incremental (amount of increase) or decremental (amount of decrease).
Should I do (choose) activity x?
MC (x) = the additional costs of doing x
MB (x) = the additional benefits of doing x
Rule:

If Expected MB (x)> Expected MC (x), do x; otherwise don't.
Application:

Would an employer ever hire anyone if the additional cost of his or her employment were greater than the marginal / additional benefit? Of course not, to do so would be irrational.

Assumptions:

- Are you married? When will you get married? You will make that decision using marginal analysis, right? Explain.

Solutions

Expert Solution

Yes, a rational person would make that decision based on marginal analysis. Ay any time where the marginal benefit of getting married gets higher than the amrginal cost of getting married, it will make sense to get married.

Now, what are the marginal benefits of getting married, from my perspective? These are-

  • Emotional support, including love, from the partner.
  • Sharing of costs in almost every field
  • Increase in total household income
  • Intangible benefits such as being happy to be with someone you love.
  • Having kids and all the emotional benefits of that

At the same time, there are some costs associated with getting married. These are-

  • The financial cost of getting married
  • Somewhat less freedom post getting married
  • Adjusting to a new lifestyle
  • Possibility of disagreements and arguments over various things
  • Possible costs of child rearing

While getting married I will keep all these factors into mind and when I feel that the benefits are outweighing the costs, as described above, I will get mamrried.


Related Solutions

Fundamental presupposition: All social phenomena emerge from the actions and interactions of individuals who are choosing...
Fundamental presupposition: All social phenomena emerge from the actions and interactions of individuals who are choosing in response to expected additional benefits and costs to themselves. Give an example of social behavior or a social situation that seems inconsistent with this fundamental presupposition. Explain specifically why you think it could be inconsistent.
How is the concept of incremental analysis used in decision-making?
 What does it mean when someone says "You get what you measured"? What are the impacts of information technology?
MARGINAL ANALYSIS - Economics for Business Decision You are a business owner of a firm that...
MARGINAL ANALYSIS - Economics for Business Decision You are a business owner of a firm that services trucks. A customer would like to rent a truck from you for one week, while you service his truck. You must decide whether or not to rent him a truck. You have an extra truck that you will not use for any other purpose during this week. This truck is leased for a full year from another company for $350/ week plus $.50...
1. Decision Making and Management Effectiveness Why do you think decision making is considered a fundamental...
1. Decision Making and Management Effectiveness Why do you think decision making is considered a fundamental part of management effectiveness? 2. How to Compensate for Relative Lack of Experience As a new, entry-level manager, how important is it for you to find ways to compensate for your relative lack of experience when trying to determine which alternative before you is most likely to succeed? What are some ways you can meet this challenge? 3. Using Social-Networking Sites to Help Market...
1. How is the concept of incremental analysis used in decision making? 2. What does it...
1. How is the concept of incremental analysis used in decision making? 2. What does it mean when someone says "You get what you measured"? 3. What are the impacts of information technology?
EGN3613: Engineering Economics Analysis Assignment 1 What are the steps used in a decision making process?...
EGN3613: Engineering Economics Analysis Assignment 1 What are the steps used in a decision making process? Provide an example of the process in bank replacing their old ATM machines with new state of the art ones. Define the role of engineers in the Business Decision Making Process. Explain the difference between large and small scale Engineering Projects. Explain in details that factors that might affect Engineering Economic Decisions What does the Economic Principle “Marginal revenue must exceed marginal cost” means?...
Attitude is a very fundamental concept in social psychology. Give a social psychological definition of this...
Attitude is a very fundamental concept in social psychology. Give a social psychological definition of this concept and provide at least two examples of attitudes, explaining how they might develop and what consequences they might have for behavior
When should managers consider decentralized decision making? What benefits might emerge?
When should managers consider decentralized decision making? What benefits might emerge?
what is outcome of Game Theoretic Decision Making in the economics.
what is outcome of Game Theoretic Decision Making in the economics.
QUESTION 16 A basic assumption of the bounded rationality model of decision making is ____. A....
QUESTION 16 A basic assumption of the bounded rationality model of decision making is ____. A. decision alternatives can be completely evaluated in terms of their potential value B. decision alternatives can be objectively rank ordered in terms of appropriateness C. preferences for alternatives seldom change as new information is acquired D. people do not evaluate all possible decision alternatives 2 points    QUESTION 17 Transformational leaders are likely to ____. A. have a relatively high tolerance for mistakes made...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT