2022_심화영어

Diamond-Water Paradox: Marginal Utility Total Utility Subjective value can show that diamonds are more expensive than water because people subjectively value them more highly. However, it still cannot explain why diamonds should be valued more highly than an essential good such as water. Three economists—William Stanley Jevons, Carl Menger, and Leon Walras—discovered the answer almost simultaneously. They explained that economic decisions are made based on marginal benefit rather than on total benefit. In other words, the marginal utility of a good is derived from its most important use to a person. So, if someone possesses a good, they will use it to satisfy some need or want, starting with the one that takes highest priority. Eugen von Böhm-Bawerk illustrated this with the example of a farmer having five sacks of grain. With the first, he will make bread to survive. With the second, he will make more bread, in order to be strong enough to work. With the next, he will feed his farm animals. The next is used to make whiskey, and the last one he feeds to the pigeons. If one of those bags is stolen, he will not reduce each of those activities by one- fifth; instead, he will stop feeding the pigeons. So, the value of the fifth bag of grain is equal to the satisfaction he gets from feeding the pigeons. If he sells that bag and neglects the pigeons, his least productive use of the remaining grain is to make whiskey, so the value of a fourth bag of grain is the value of his whiskey. Only if he loses four bags of grain will he start eating less; that is the most productive use of his grain. The last bag of grain is worth his life. 05 10 15 20 25 Eugen von Böhm- Bawerk (1851–1914) was an Austrian economist and a prominent member of the Austrian School of economics. simultaneously sack grain pigeon New Words 78 Lesson 3