Rational People Think at the Margin (principle 3 _ microecons)
Mar 10, 2024, 1 min read
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Marginal changes: small, incremental adjustments to an existing plan of action
People make decisions by considering the marginal costs and benefits β make informed choices & maximize utility or outcome
E.g., comparing a diamond to water
If you are in a normal situation: 1 more diamond > 1 more liter of water β diamond in this situation can bring more marginal benefits
If in the Sahara desert: 1 more liter of water > 1 more diamond β marginal cost is that water can help you stay hydrated and not die in the middle of the desert