Rational People Think at the Margin

Rational people know that decisions in life are rarely black and white but usually involve shades of gray. At dinnertime, the decision we face is bot between fasting of eating like a pig but whether to take that extra spoonful of mashed potatoes. When exams roll around, our decision is not between blowing them off or studying 24 hours a day but whether to spend an extra hour reviewing our notes instead of watching TV. Economists use the term marginal changes to describe small incremental adjustments to an existing plan of action. Margin means "edge," so marginal changes are adjustments around the edges of what we are doing. Rational people often make decisions by comparing marginal benefits and marginal costs.Marginal decision making can help explain some otherwise puzzling economic phenomena.