Most decisions are not of the all or nothing variety. Most decisions involve choosing a little more or a little less of something. Rational decision making involves comparing the costs and benefits of that incremental change. The cost of obtaining one additional unit of a good or service is called the marginal costs. The benefits obtained from consuming one additional unit of a good or service are called the marginal benefits. If the marginal benefits are greater than the marginal costs, it makes sense to purchase another unit of the good; when the marginal benefits are less than the marginal costs, then you do not purchase another unit of the good.
Should you have come to class today? Let's compare the marginal costs and benefits.
| gas, other car expenses | $2.00 |
| paper & ink used | 0.25 |
| opportunity costs (sleeping) | 1.00 |
| total marginal costs | $3.25 |
| knowledge | 0.25 |
| higher lifetime income due to better economics grade earned because you learned about opportunity costs in class today | $0.15 |
| were able to socialize with other students | 3.00 |
| total marginal benefits | $3.40 |
