Final answer:
Economists focus on marginal benefits and costs instead of total benefits and costs when making decisions because it helps them analyze how costs and benefits change from one option to another.
Step-by-step explanation:
Economists focus on marginal benefits and costs rather than total benefits and costs when making decisions because it helps them analyze how costs and benefits change from one option to another. Marginal analysis involves examining the benefits and costs of choosing a little more or a little less of a good. This approach is important because it allows economists to consider the incremental impact of each additional unit of a good or resource.
For example, let's say a business is deciding whether to produce and sell one more unit of a product. By considering the marginal benefits and costs, economists can determine if the additional revenue from selling the extra unit outweighs the additional production costs. This helps them make informed decisions about production and allocation of resources.
Economists prefer marginal analysis because it better informs decisions on the incremental benefits and costs of goods, which is more relevant due to the principle of diminishing marginal utility.
Economists focus on marginal benefits and marginal costs rather than total benefits and costs when making decisions because most choices involve examining the additional benefits and costs of consuming a little more or a little less of a good. This approach, known as marginal analysis, is essential since the optimal decision often depends on how these marginal benefits and costs compare incrementally, rather than on the totals. The concept of diminishing marginal utility further supports marginal decision-making, as it illustrates that the extra benefit gained from consuming additional units of a good decreases as more of the good is consumed, making the evaluation of the next unit more relevant than the total quantity.