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Critical Analysis of Economic Principles and Their Impact on Decision-Making and Trade

Examination of fundamental economic theories and applications

David Miller
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Critical Analysis of Economic Principles and Their Impact on Decision-Making and TradeMichelle GordonBUAD 641Week 2Critical Thinking1.How do marginal benefits and marginal costs influence consumer decision-makingand the efficient level ofproduction?If we are economists we want to look at marginal benefits and marginal costs to help us to seewhy consumers buy what they buy. When people make decisions they look at the additionalcost and benefit of the decision. The cost or benefit of that decision is called the marginal cost orthe marginal benefit.If consumers are making rational decisions and if two products are of equalbenefit to a consumer, then he or she will choose the cheaper product.However, if two productsare the same price, the consumer will choose the one that provides the higher benefit.Peoplewho have a certain incomeswill also have to make a choose based on how much money theyhave.Economists believe that consumers make decisions based onshould one more unit of thegood be obtained or not? Marginal benefit refers to what people are willing to give up in order toobtain one more unit of a good, while marginal cost refers to the value of what is given up inorder to produce that additional unit. Additional units of a good should be produced as long asmarginal benefit exceedsthemarginal cost. It would be inefficient to produce goods when the

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Economics

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