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### Course: Microeconomics>Unit 4

Lesson 1: Consumer and producer surplus

# Demand curve as marginal benefit curve

To get a better intuition about how much a consumer values a good in a market, we think of demand as a marginal benefit curve. In this video we look at the demand curve from a marginal benefit framework. Created by Sal Khan.

## Want to join the conversation?

• Can somebody please explain to me what marginal benefits is and give me some examples?
• Marginal benefit is the added benefit of each additional unit(thing) consumed.

For example,
You are thirsty. You drink a glass of water. Now that you are less thirsty, you would probably drink less water, because it is more wise for you to drink less water than before because you are not that thirsty anymore (there is less benefit of having water). For your third drink, you may drink no water at all because there is not much benefit, the benefit for drinking the first glass of water was more than the benefit of drinking the second/third glass of water. So we can see the marginal benefit goes down as more unit is consumed.

Without marginal benefit, we would have kept consuming because the value for consuming a unit never decreases. That means we would have eaten food or drank water all the time.
• What is the definition of Marginal Benefit?
• A hint: when you read XXXXX marginal, interpret as XXXXX additional.
• I wonder if a previous video on how to look demand curve as marginal benefit curve is missed.
I totally can not understand the whole video the first time I saw this.
• I would think that marginal benefit was defined as "the extra benefit gained from increasing the quantity sold by one". So if the firm sold car#1 for \$60, and car#2 for \$50, the marginal benefit would be \$60 for car#1 and \$50 for car#2. If the firm sets the same price for all cars, the marginal benefit is the same for all cars.

Is this definition right or wrong? He doesn't clearly define marginal benefit, and the answers regarding its definition (in this comment section) are different.
• Remember that the word "marginal" means "the next one". You're going to want to think in terms of consumers on this one.

Let's say you're hungry, and you're willing to pay \$10 for your first hamburger. The marginal benefit of that first hamburger is \$10. Then, you start getting full, so you think you'd only be willing to pay \$8 for the next hamburger. The marginal benefit of that second hamburger is \$8. Then now you're getting really full, so you're only willing to pay \$6 for a third burger. That third burger has a marginal benefit of \$6.

Hope that helps!
• Where can I find the video Sal mentioned where he introduces PPF?
• sal gives the p.p.f (production possiable fruntier) as an axemple (), where can i find the relevant video?
• Even if there is 1 car why would the customers gets excited to pay \$60 K? Instead they could wait until the price goes down.
• That is the whole point of economics, predicting consumer habits. Some of us will wait (I'm assuming you will) but others will want to get the product, regardless of the price.
• In the middle of the video, Sal saids that the 1st person would be able to get the new car for "more than they were willing to pay". I thought that the 1st person would be able to get the car at less than they were willing to pay since the price decreased from 60k to 50k.
• - And yes, you're right, he has said it backwards. At a price of \$50,000, the first person will be getting the car for less than what they were willing to pay.
(1 vote)
• So for the 1st unit the marginal benefit would be 60?
• Yes, it is. Sal does mention that the marginal benefit for the 3rd car is 40 at

But basically, the marginal benefit for the 3rd consumer is 40, yet for the second one still 50, but s/he is paying 40, and for the first one its 60 yet paying 40.
• What are the 4 factors of production ?
• Everyone in economics can agree on three: Land, Labor, and Capital. However, it is debated that there is a fourth: Entrepreneurship or Entrepreneurial Ability, many people argue that this is just specialized labor.