Author Question: What is marginal benefit? How is it measured? What will be an ideal ... (Read 71 times)

cartlidgeashley · **on:** Jun 29, 2018

What is marginal benefit? How is it measured?

What will be an ideal response?

Question 2

A video rental store rents old movies for 1.50 per day. On average, 300 movies are rented each day. The store receives several copies of a new smash movie just released in video and decides to rent these movies at 3.50 per day.

Now, 400 movies are rented each day. Thus, though the average rental price of a movie increased, the quantity rented increased. Does this mean that the law of demand does not hold for this market?

ms_sulzle · **Reply #1 on:** Jun 29, 2018

Answer to Question 1

The marginal benefit from a good or service is the benefit received from consuming one more unit of it. It is measured by what an individual is willing to give up (or pay) for an additional that last unit.

Answer to Question 2

The two types of movies (old and new release) represent two different markets. Thus, there is a demand for old movies and a demand for new releases. Both of these demand curves would be downward sloping, meaning that the law of demand applies.