Suppose that Marie is buying bananas. She decides that she would like to purchase three bananas at the price of $0.25 per banana, but not a fourth banana. Which of the five foundations of economics best describes Marie's thinking?

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30 October, 00:14

Suppose that Marie is buying bananas. She decides that she would like to purchase three bananas at the price of $0.25 per banana, but not a fourth banana. Which of the five foundations of economics best describes Marie's thinking?

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Aurora Sherman · Answer 1

Marginal Thinking

Explanation:

The economic principle of marginal thinking means that rational people (people who act in a way that maximizes their personal well-being) think and take decisions at the margin.

From the concept of marginal thinking, we derive concepts such as marginal utility, which is the extra benefit that a person obtains from the consumption of one extra unit of a good, and marginal cost, which is the extra cost a person must pay from the consumption of one more unit of a good.

If the marginal cost is higher than the marginal benefit, a rational person decides not to consume the good.

Marie is affected by marginal utility and marginal cost because while she considers that three bananas for $0.25 is a deal that benefits her, a fourth banana would represent a marginal utility that is less than the marginal cost, thus, she decides not to buy the fourth banana.