Behavior Choices that effect the Economy

Having in mind the diminishing marginal utility makes this model of behavior of choice very powerful. It will not only say what people will choose, but how much of each good they will choose. However, it is not perfect. Suppose for example that people have a clear idea of the utility of several goods, that they have a good idea of how quickly marginal utilities diminish and do not have difficulty making comparisons.

Economists consider that the cost benefit analysis and diminishing marginal utility are good descriptions of the process of decision making because there is strong evidence that other species also behave in the same consistent way with these concepts.

There was an example that was explained about how scientists can train birds to peck at a button in order to get food and another button so they can have time in a walker. If scientists increase the cost of one of the options increasing the number of pecks necessary to achieve it, the birds react in a rational way, by not pecking so much at that button. And what is even more interesting is that they start to peck more on the button that has the opposite option.

Birds seem to understand that they can only give a limited number of pecks before getting tired, and they assign these pecks between the two options in order to maximize their total utility. As a consequence, when the costs and relative benefits of the options change, the birds react by modifying their behavior in a very rational way.

Most species also seem to be affected by diminishing marginal utility and begin to feel indifferent to marginal units of something they have recently enjoyed a great amount. It is said that even bacteria behave the same way. Therefore while it is true that economic models of human behavior ignore some relevant factors, they also take into account some very fundamental and universal human behaviors.