Tuesday, May 24, 2011

MC versus MR more often!

Not sure why I've been so focused on energy and fuel consumption in particular, but here is another idea that crossed my mind as I was filling up my tank:

We assume (at least in economics) that people make rational decisions. Within this assumption we think that people will make decisions based on marginal cost versus marginal revenue. But when do we really take the time to weigh MC versus MR in terms of gas consumption. Most of the time it is for long trips or maybe when we decide which car to buy. In these cases we use our calculators to calculate the miles per gallon. Not a bad measurement, however, it limits how often we make assessments of our fuel consumption choices.

In these instances we consider mpg at specific decision points: when we are at the pump or when we are looking to buy a car. But what if we create a new measurement: dollars per mile. This might motivate us to assess MR v. MC more often. Maybe we might all start making marginally more environmentally conscience choices that might, in the grand scheme of things, affect how much we consume as a society.

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