Module 2 and 3 Discussion
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Aleksandra Wojdakowska posted Jul 13, 2020 1:39 PM
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Investopia defines marginal benefit as “ maximum amount a consumer is willing to pay for an additional good or service. It is also the additional satisfaction or utility that consumer receives when the additional good or service is purchased.” In regards to food products, it is common to address this additional satisfaction in terms of either a full stomach or taste. In the video clip from Cool Hand Luke, the marginal benefit drive appears to be not from hunger or craving, but instead, it appears that his drive in consuming all the eggs is simply from his desire to win a bet. As Luke begins the hour he has to eat all the eggs, we see the eggs are not hard to eat, as, at this point, he is satisfying any hunger he may have had. His body is still benefitting not only his ego. However, as we see him begin to eat more eggs than an average body can handle, this benefit goes away and instead, we see the marginal cost begin. With each additional egg, Luke feels sicker and sicker; he reaches the constraint line of how many eggs he can consume. Each egg is now much harder to swallow and Luke is put in a position where the advantage of the marginal benefit and the cost begin to lessen.
If Luke had to pay for each egg he ate, the marginal benefit would be even lower and therefore the marginal cost becomes more and more disadvantageous. Not only would Luke have to deduct the cost of the eggs from any winnings he may accrue from the bet, he would also have to consider that if he were to fail the challenge, his losses will be even greater. Therefore, once the decision is made to follow through with eating the eggs it may be an additional drive towards marginal benefits that Luke has to pay for the eggs. He has to keep eating or else his cost will be much higher and not for much benefit. That is, his marginal utility per dollar spent would be lower.
Marginal utility per dollar spent is a concept I frequently keep in mind when making my own purchase decisions. For example, when grocery shopping for eggs. I tend to strive to purchase only organic food for the health benefits. However, sometimes these benefits are not high enough to justify paying much more for eggs. Or, perhaps there is a financial obligation I have to save for which means cutting corners on the daily expenses. In these moments, I’ll choose the carton of eggs that is less expensive as opposed to the desired organic brand.
The Ins and Outs of Marginal Benefits. (2020). Investopedia. https://www.investopedia.com/terms/m/marginalbenefit.asp
Dean, E. (2020). 7.1 Consumption Choices – Principles of Microeconomics: Scarcity and Social Provisioning. Pressbooks. https://openoregon.pressbooks.pub/socialprovisioning/chapter/7-1-consumption-choices/
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Dakota Smith posted Jul 13, 2020 12:51 PM
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What is driving his marginal benefit is his friends that placed a bet on him not to let them down and also a free meal. This out weighs his marginal cost because he is not paying for the eggs and has nothing to lose. His decision would change if he had to pay for the eggs because of the law of diminishing marginal utility, which according to Agarwal is that the first unit of a good will have more utility than the second time you have that good, and so on. The more eggs he eats, the more money he loses, and the more he doesn't feel good. At some point the cost would outweigh the benefits. According to Moffatt, marginal utility is how much one more unit will increase our happiness. You can use this in our daily lives to make decisions. In fact I did when it was time for me to buy a new phone. I bought the IPhone 8 instead of the IPhone 10 because the cost as not worth the utility per dollar spent. The IPhone 10 was nicer but it was also more expensive. I would rather have the 10 if money were not a subject but it was not worth spending the extra money to get a 10.
Agarwal, P. (2020, May 21). Marginal Utility. Retrieved July 13, 2020, from https://www.intelligenteconomist.com/marginal-utility/
Moffatt, M. (n.d.). How Marginal Utility in Used in Economics. Retrieved July 13, 2020, from https://www.thoughtco.com/marginal-utility-in-economics-1148161
