Which of the following is the best example of how we make decisions using margin

Question

Which of the following is the best example of how we make decisions using marginal analysis?

a) You pay to repair your used car because of all the money you have spent on recent repairs

b) overeating at an all-you-can-eat buffet

c) not investing in a company because you do not like its product

d) not breaking up with your significant other because of all the time and effort you have already invested in the relationship

e) deciding to buy an economy car rather than a more expensive luxury model

a) You pay to repair your used car because of all the money you have spent on recent repairs

b) overeating at an all-you-can-eat buffet

c) not investing in a company because you do not like its product

d) not breaking up with your significant other because of all the time and effort you have already invested in the relationship

e) deciding to buy an economy car rather than a more expensive luxury model

Explanation / Answer

The best example is option (e) i.e deciding to buy an economy car rather than a more expensive luxury model.

Reason:- This is because as compared to the expensive luxury car the cost of an economy car will be less, repair cost will be less , fuel consumption as compared to the luxury car will be reasonable and less. Thus, the object to buy a car would be satisfied by buying an economy car rather than a luxury car. This would be the best decision using marginal analysis.

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