Marginal utility thesis

Specific: diminishing marginal benefit means that when other factors remain unchanged and only one factor is added, the product increment brought by this factor increase will decrease.

In the story of three monks, the factors of production are: water at the foot of the mountain, buckets and monks. This product is water selected for drinking. )

When you become a monk, you use water, two buckets and a monk.

When two monks are involved, the elements used are water, a bucket and two monks.

When there are three monks, the elements used are water, 0 barrels and three monks.

Therefore, in this story, the bucket and the monk have changed at the same time, so the marginal benefit law cannot be used to explain the decrease of the final product.

In fact, according to the premise of the law of marginal benefit (only monks change, others remain unchanged), this story is indeed a diminishing marginal benefit: monks are increasing, but the output has always been two barrels of water. If so, it can be explained by the law of diminishing marginal returns.

PS: Water is not considered as an element here. If that water pole is also an element and must be used, it will be disgusting.

Simply put, the law of diminishing marginal utility refers to the fact that in the production process, the utility generated is increasing before the number of main means of production increases to a certain number. In other words, every unit of means of production increases, so does the utility of output. However, with the continuous increase of means of production, the utility of production does not always increase, especially when the means of production increase to a certain amount, the utility of production begins to decline, which is the phenomenon of diminishing utility. The so-called marginal utility refers to the unit production utility that can be obtained every time the unit means of production is increased.

For example, when your excellent work unit gives you a bonus as an incentive, your original salary is, for example, 1 1,000 yuan/month. When the monthly bonus amount starts from 1 1,000 yuan, it will increase at the rate of 1 1,000 yuan each time. Maybe every increase of 1000 yuan at this time will have a certain effect on your encouragement, but when the extra 100 yuan is obviously weak, especially when it reaches 2000 yuan (salary 1000 yuan, plus 2000 yuan). If you are asked to work overtime and say that the bonus will increase by 100 yuan, you may simply give up this reward and choose to take a vacation or spend time with your family. At this time, the increase of 100 yuan has become diminishing for you.

Give a classic example:

A salesman sells telephones from door to door. Every time she sells a telephone, the marginal income of the next telephone is greater. Why? Because the more people use the telephone, the greater the value of the telephone. If only one person in the world has a telephone, what is the value of his telephone?

This is the increasing marginal revenue.

Correspondingly, there are marginal costs.

Give another example:

A factory producing ice cream has 65,438+000 ice cream machines, and each machine can only produce one ice cream per hour. When the factory output is low, 100 machines use 80 or 90 machines. No problem. But the problem comes when the factory plans to expand production but doesn't want to buy new machines. For example, the factory wants to produce 200 ice creams per hour. Then the workers have to wait by the machine until it produces this one and then add raw materials to produce the next one. This wastes time and leads to inefficiency. The more the factory produces, the greater the cost of producing the next ice cream (time is also a cost, which can also be called opportunity cost, because the worker is waiting during this time, and he could have done other things to create wealth for the factory).

This is the increasing marginal cost.

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