LESSON 3 MARGINALISM
How do you know when
one more is too much?
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HIGH SCHOOL ECONOMICS 3RD EDITION © COUNCIL FOR ECONOMIC EDUCATION, NEW YORK, NY
LESSON 3 MARGINALISM
MARSHMALLOW ACTIVITY
• Why did you stop buying marshmallows?
• How many more marshmallows will you
eat at a price of zero?
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HIGH SCHOOL ECONOMICS 3RD EDITION © COUNCIL FOR ECONOMIC EDUCATION, NEW YORK, NY
LESSON 3 MARGINALISM
Marginal utility is the extra value or
additional satisfaction a consumer
obtains from consuming one
additional unit of output.
• What happened to each student’s total
satisfaction with each marshmallow purchased
and eaten?
• What happened to the additional satisfaction or
marginal utility as more marshmallows were
purchased and eaten?
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HIGH SCHOOL ECONOMICS 3RD EDITION © COUNCIL FOR ECONOMIC EDUCATION, NEW YORK, NY
LESSON 3 MARGINALISM
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.
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HIGH SCHOOL ECONOMICS 3RD EDITION © COUNCIL FOR ECONOMIC EDUCATION, NEW YORK, NY
LESSON 3 MARGINALISM
THINK OF THE FOLLOWING EXAMPLES
IN RELATION TO THE QUANTITY
PURCHASED CONSIDERING
DIMINISHING MARGINAL UTILITY
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HIGH SCHOOL ECONOMICS 3RD EDITION © COUNCIL FOR ECONOMIC EDUCATION, NEW YORK, NY
LESSON 3 MARGINALISM
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.
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HIGH SCHOOL ECONOMICS 3RD EDITION © COUNCIL FOR ECONOMIC EDUCATION, NEW YORK, NY
LESSON 3 MARGINALISM
WATCH THE FOLLOWING VIDEO
• https://www.youtube.com/watch?v=0BAMv
6lV2t4
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HIGH SCHOOL ECONOMICS 3RD EDITION © COUNCIL FOR ECONOMIC EDUCATION, NEW YORK, NY
LESSON 3 MARGINALISM
HOW DOES MARGINAL ANALYSIS
AFFECT YOUR DECISION MAKING:
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HIGH SCHOOL ECONOMICS 3RD EDITION © COUNCIL FOR ECONOMIC EDUCATION, NEW YORK, NY
LESSON 3 MARGINALISM
REVIEW
• What is Marginal Utility
• Explain Diminishing Marginal Utility
• What is Marginal analysis
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HIGH SCHOOL ECONOMICS 3RD EDITION © COUNCIL FOR ECONOMIC EDUCATION, NEW YORK, NY
LESSON 3 MARGINALISM
GLOVE FACTORY EXAMPLE
•
•
•
•
•
Tape off 36x48” area
Two pairs of scissors two pens and paper
One desk in the middle with supplies
One worker to start
Track number of workers & gloves
produced
• Go for one minute and stop
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HIGH SCHOOL ECONOMICS 3RD EDITION © COUNCIL FOR ECONOMIC EDUCATION, NEW YORK, NY
LESSON 3 MARGINALISM
Glove Production Table
Number
of
Workers
(1)
Number of
Gloves
Produced
(2)
(3)
(4)
(5)
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HIGH SCHOOL ECONOMICS 3RD EDITION © COUNCIL FOR ECONOMIC EDUCATION, NEW YORK, NY
LESSON 3 MARGINALISM
Add another worker
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HIGH SCHOOL ECONOMICS 3RD EDITION © COUNCIL FOR ECONOMIC EDUCATION, NEW YORK, NY
LESSON 3 MARGINALISM
New Category
Glove Production Table
Number
of
Workers
(1)
Number of
Gloves
Produced
(2)
Marginal
Product
(3)
(4)
(5)
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HIGH SCHOOL ECONOMICS 3RD EDITION © COUNCIL FOR ECONOMIC EDUCATION, NEW YORK, NY
LESSON 3 MARGINALISM
Marginal product is the additional
output produced by each successive
unit of an input.
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HIGH SCHOOL ECONOMICS 3RD EDITION © COUNCIL FOR ECONOMIC EDUCATION, NEW YORK, NY
LESSON 3 MARGINALISM
ADD A THIRD WORKER
• What is the marginal product of the 2nd
and 3rd workers
• Then a 3rd, 4th, 5th, 6th, 7th, 8th 9th while
tracking the results
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HIGH SCHOOL ECONOMICS 3RD EDITION © COUNCIL FOR ECONOMIC EDUCATION, NEW YORK, NY
LESSON 3 MARGINALISM
Glove Production Table
Number
of
Workers
(1)
Number of
Gloves
Produced
(2)
Marginal
Product
(3)
Value of
Additional
Gloves
Produced
(4)
Marginal
Cost of
Labor (1
min
worked)
(5)
?
.12
?
.12
?
.12
?
.12
?
.12
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HIGH SCHOOL ECONOMICS 3RD EDITION © COUNCIL FOR ECONOMIC EDUCATION, NEW YORK, NY
LESSON 3 MARGINALISM
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.
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HIGH SCHOOL ECONOMICS 3RD EDITION © COUNCIL FOR ECONOMIC EDUCATION, NEW YORK, NY
LESSON 3 MARGINALISM
Marginal cost is the increase in a
producer’s total cost when it increases
its output by one unit.
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HIGH SCHOOL ECONOMICS 3RD EDITION © COUNCIL FOR ECONOMIC EDUCATION, NEW YORK, NY