What is the definition of marginal thinking?
Understand the Problem
The question is asking for the definition of 'marginal thinking', which refers to a decision-making process that involves comparing the additional benefits of an action to the additional costs incurred by that action. This concept is essential in economics and helps in understanding how individuals make choices based on incremental changes.
Answer
Marginal thinking is deciding based on the additional cost and benefit of one more unit.
Marginal thinking involves making decisions based on the additional cost and benefit of one more unit of something, ignoring sunk costs.
Answer for screen readers
Marginal thinking involves making decisions based on the additional cost and benefit of one more unit of something, ignoring sunk costs.
More Information
Marginal thinking helps in efficient decision-making by focusing on the future impacts of small changes rather than past investments.
Tips
A common mistake is to confuse marginal thinking with total valuation, ignoring that it's about assessing incremental changes.
Sources
- Conceptually - Marginal Thinking - conceptually.org
- Margins and Thinking at the Margin - Econlib - econlib.org
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