LESSON 3 MARGINALISM

3-1

HIGH SCHOOL ECONOMICS 3RD EDITION © COUNCIL FOR ECONOMIC EDUCATION, NEW YORK, NY

How do you know when one more is too much?

LESSON 3 MARGINALISM

3-2

HIGH SCHOOL ECONOMICS 3RD EDITION © COUNCIL FOR ECONOMIC EDUCATION, NEW YORK, NY

Marginal utility is the extra value or additional satisfaction a

consumer obtains from consuming one additional unit of output.

LESSON 3 MARGINALISM

3-3

HIGH SCHOOL ECONOMICS 3RD EDITION © COUNCIL FOR ECONOMIC EDUCATION, NEW YORK, NY

Diminishing marginal utility is when the additional satisfaction or marginal

utility associated with consuming additional units of the same product in

a given amount of time eventually declines.

LESSON 3 MARGINALISM

3-4

HIGH SCHOOL ECONOMICS 3RD EDITION © COUNCIL FOR ECONOMIC EDUCATION, NEW YORK, NY

Marginal analysis is a decision-making tool for comparing the

additional or marginal benefits of a course of action to the additional or

marginal costs.

LESSON 3 MARGINALISM

3-5

HIGH SCHOOL ECONOMICS 3RD EDITION © COUNCIL FOR ECONOMIC EDUCATION, NEW YORK, NY

Glove Production TableNumbe

r of Worker

s(1)

Number of Gloves

Produced(2) (3) (4) (5)

LESSON 3 MARGINALISM

3-6

HIGH SCHOOL ECONOMICS 3RD EDITION © COUNCIL FOR ECONOMIC EDUCATION, NEW YORK, NY

Marginal product is the additional output produced by

each successive unit of an input.

LESSON 3 MARGINALISM

3-7

HIGH SCHOOL ECONOMICS 3RD EDITION © COUNCIL FOR ECONOMIC EDUCATION, NEW YORK, NY

The law of diminishing returns states that as more units of a variable input

are added to one or more fixed inputs, eventually the number of additional

units of output produced will begin to fall.

LESSON 3 MARGINALISM

3-8

HIGH SCHOOL ECONOMICS 3RD EDITION © COUNCIL FOR ECONOMIC EDUCATION, NEW YORK, NY

Marginal cost is the increase in a producer’s total cost when it

increases its output by one unit.