Question

You have figured out the marginal cost and the marginal benefit of buying an extra smoothie. In 2-3 sentences, describe how you would use these measurements to make a decision that leaves you better off.

Answer 1

Marginal benefit is a microeconomic concept that explains how much the consumer adds to the satisfaction of each unit consumed by a given product. For economic theory, the marginal benefit is decreasing, that is, with each additional unit the utility of the product decreases. The first smoothie has a lot of value, the second a little less, the third less so, so far I won't want smoothies anymore.This makes sense because the consumer is gradually satisfied when consuming more than one product.

Marginal Cost is the cost of buying one unit of one more product. In this case, the marginal cost is the price of an extra smoothie. Since the marginal benefit is decreasing, the consumer will do a cost benefit analysis. While the marginal benefit of consuming an extra smoothie is greater than the marginal cost of the extra smoothie, the consumer tends to buy more. When marginal cost becomes greater than marginal benefit, the consumer tends to stop buying.

Answer 2

I think I must first get the marginal cost of the product before i bought if it is worth it to its value, Then i would compute for the marginal benefit to know what would i gain in this product. Lastly I would compare both the marginal cost and marginal percentage if the cost is lower than the benefit then the product is worth it to buy.