Lesson 4: The Power of Marginal Analysis Related to the Environment

Lesson Overview

An understanding of the concept of “marginal” is one of the key tools economists use to analyze and rank the importance of societal issues, including issues surrounding the environment. This lesson introduces students to marginal decision making, both through personal, as well as societal issues.

Key Terms & Economic Concepts

Externality	Negative Externality	Long Run
Positive Externality	Marginal	Short Run

Objectives

Students will be able to:

• Define the concept of “marginal”
• Explain the importance of “expected” related to marginal cost and benefit
• Apply “expected marginal” decision making to real world issues
• Explain the importance of having accurate information in decision making
• Apply expected marginal cost / expected marginal benefit to environmental issues

Time Required

1 class period (50 minutes)

Materials

• Presentation Slides for Lesson 4
• Handout 1: Environmental, Social & Governmental Issues Ranking – 1 per student

Lesson 4 Key Ideas

1. The concept of “marginal” permeates our decision making, and effective decisions are made at the margin.
2. Marginal thinking applies to both individual and societal issues.
3. When making decisions, even using the best marginal thinking, one must consider “expectations” of that decision.
4. Expectations of decisions may be short and/or long related.
5. Individuals approach decision making in a variety of ways based on their profession, background, or employment source.
6. Scarcity prohibits society from solving all its problems, therefore problems must be evaluated on “most effective use of available resources” basis.
7. It is important to use quality, reliable data in making decisions.
8. Once a decision is made, there may be positive or negative externalities as a result of the decision.