My micro econ prof was trying to explain marginal analysis and he said the following:
If your marginal happiness is 0 then you are maximally happy.
I don't understand this at all. Could someone explain this to me? Thanks!
Sure! I'd be happy to explain this concept to you. In microeconomics, the principle of marginal analysis is used to analyze the change in benefits or costs resulting from a small change in a particular action or decision. Marginal happiness, in this context, refers to the additional or incremental level of happiness or satisfaction gained from consuming or engaging in an activity.
The statement made by your professor, "If your marginal happiness is 0, then you are maximally happy," might seem counterintuitive at first. However, to understand this statement, we need to consider the concept of diminishing marginal utility.
Diminishing marginal utility states that as we consume or engage in more of a particular activity, the additional satisfaction or happiness we derive from each additional unit gradually decreases. In other words, the first few units of consumption generally bring the most happiness, while subsequent units add less and less happiness to our overall satisfaction.
Now, imagine you are engaging in an activity that brings you happiness, like eating ice cream. Suppose you start with zero units of ice cream and each additional scoop of ice cream increases your happiness. As you continue to add scoops, the increase in happiness per scoop gradually diminishes. At a certain point, the additional happiness gained from consuming another scoop becomes smaller and smaller, until it reaches zero.
In this scenario, if your marginal happiness from consuming another scoop of ice cream is zero, it means that you have reached a point of maximum happiness or satisfaction given the context of consuming ice cream. Adding another scoop would not make you any happier, as the marginal benefit is zero.
So, in summary, when your professor said that "if your marginal happiness is 0, then you are maximally happy," they were referring to the concept of diminishing marginal utility and the idea that once the incremental happiness from consuming another unit of a good or engaging in an activity becomes zero, you have reached a point of maximum happiness in relation to that specific action or decision.