Critical Analysis of Economic Principles and Their Impact on Decision-Making and Trade

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Critical Analysis of Economic Principles and Their Impact on Decision-Making and TradeMichelle GordonBUAD 641Week 2Critical Thinking1.How do marginal benefits and marginal costs influence consumer decision-makingand the efficient level ofproduction?If we are economists we want to look at marginal benefits and marginal costs to help us to seewhy consumers buy what they buy. When people make decisions they look at the additionalcost and benefit of the decision. The cost or benefit of that decision is called the marginal cost orthe marginal benefit.If consumers are making rational decisions and if two products are of equalbenefit to a consumer, then he or she will choose the cheaper product.However, if two productsare the same price, the consumer will choose the one that provides the higher benefit.Peoplewho have a certain incomeswill also have to make a choose based on how much money theyhave.Economists believe that consumers make decisions based onshould one more unit of thegood be obtained or not? Marginal benefit refers to what people are willing to give up in order toobtain one more unit of a good, while marginal cost refers to the value of what is given up inorder to produce that additional unit. Additional units of a good should be produced as long asmarginal benefit exceedsthemarginal cost. It would be inefficient to produce goods when the

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marginal benefit is less than the marginal cost.So there is an efficient level of productionwhenmarginal benefit is equal to marginal cost.2.How do externalities, such as pollution, affect decision-making for both companies andconsumers, and how can marginal analysis be used to address these issues?Externalities are consequences that happen to a third party. It can be positive or negative.Pollution that happens from a factory that goes into the surrounding environment can cause harmto the health of the people who live by. This is why it is so important for the politicians to makedecisions based on a marginal analysis that has been done about pollution and the affect it has onour economy.The first unit of pollution that is cleaned up has a very high benefit value toconsumers. Each additional unit is valued at a lower level than the previous one because thepollution level continues Even though people who live next to a factory may be concerned withmaking the pollution less the company might not want to lower the pollution if the costs ofminimizing pollution is bigger than the benefits that the factory receives. The factory canmeasure it's marginal revenue against the marginal cost of the new technology that they musthave. if the marginal revenue is higher than the marginal cost than they will consider makingchanges to lower the pollution.Another example that I have experienced is the ObamaHealthcare.Idon't think they really analyzed this policy and say what problems it has caused toa bunch of Americans who have to rely on Obama Healthcare. I have Obama Healthcare and Ihave had nothing but problems with it . I try to go to the obgyn to get a simple pap smear and Ihave to jump through so many hoops. It is so disorganized and has taken me over a month justto go to the doctor what ifIreally had something wrong with me I could die by the time I get to

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