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Prezi presentation
Opportunity cost can never be 0
Opportunity cost can never be 0 as the second principle of Mankiw’s economics says that the cost of anything is what you give up for it.
Even if it’s money, time or another activity, there is always something that can replace the good you chose, even if it is the best one there is. As an example, if I want to buy a dress, even if I go through the entire mall and choose the best one, the opportunity cost still would not be 0, as with the time I spent searching for the dress I could have chosen a manicure or with the money I spent on the dress I could have bought the best hat.
To sum it all up, the opportunity cost can be brought to a minimum through effort and planning, but can never be quite zero.
Why marginal utility can never be negative?
Marginal utility is the satisfaction one hopes to get when consuming an unit of a good. As total utility reaches its maximum(total fulfillment of the need that the good hopes to satisfy(, marginal utility will go to 0)the last unit of the good satisfied the need completely(. We can say that total utility and marginal utility are negatively corelated as when one increases the other decreases.
When the marginal utility reaches 0 and another unit of the good won’t bring any more satisfaction, the rational consumer will stop consuming the good, as there is no point in it. If he continues to consume it, it is not the same need that needs to be satisfied as it is already done. The need will shift to another one, satisfied by the same good and once again marginal utility will decrese with each unit consumed until the new need is fully satisfied (total utility in the case of the new need reaches 0).
As an example we can take a woman shopping for shoes, the first pair she buys will satisfy the need of protecting her feet, but if she continues to buy them, the need will shift to having shows to match her clothes.