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Essential Question

How can I use Marginal Analysis to improve my decision-making?

Why you Should Care

You make decisions all the time. Better decisions = better life!

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Utility and�Marginal Thinking

“A thing worth doing is worth doing well.”

Copy the quote above. What does it mean? Do you agree with it? Explain.

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Decision making can be hard

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Daughter’s volleyball game

Emergency meeting at work

-or-

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Study for tomorrow’s quiz

Go to the movies with my friends

-or-

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Luckily for you, economists have a tool to help: �Marginal* Analysis!

*Marginal: one more or additional unit of something

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https://www.youtube.com/watch?v=5nmyzM6KTnc

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What is utility?

Utility is an amount of human satisfaction measured in utils.

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What is utility?

Humans try to maximize their utility when they make choices. They do this by making decision at the margin.

Hmm… Would I increase my utils if I took one more step?

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Utility is relative! People don’t have to agree on how much utility something provides.

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You might not see much difference between these two products – but some people sure do!

Playing Card:

$0.01

Pokémon Card:

$50,000

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You will be given two options. Pick the one that would provide you with the most utility!

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OR

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OR

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OR

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OR

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OR

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Eat Fresh Challenge

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Eat Fresh Challenge

It’s time to Eat Fresh®! Imagine you were going to Subway. What would you order? Not sure, check the menu! (Let’s keep it a little simple, stick to sandwiches)

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Reflection Qs

Why did you order what do you did?
Is Mayo better ENOUGH than mustard to justify the higher calories?
Veggies are basically zero calories. Shouldn’t you just have ALL THE VEGGIES?
Is cheese worth it?

Eat Fresh Challenge

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But benefit-Cost Analysis isn’t necessarily an either-or situation.

THIS

THAT

But our decisions aren’t usually all or nothing.

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More often, it is a how much situation.

THIS

MORE

OF

THIS

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And it isn’t constant!

EXPERIMENT!

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Marshmallow	Utility Gained
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2
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8
9
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14

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Law of Diminishing Marginal Utility

In a given time period, consumers generally receive less utility from additional (marginal) units of a good consumed.

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In English…

The more you consume something, the less you value one additional unit of it.

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DMU is a human thing. Animals don’t seem to experience it. They are happy to repeat experiences.

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