Economic Bads, Marginal Utility, and Indifference Curves
Suppose that instead of a good you have n units of an economic bad. Now an economic bad is something that takes away your utility, deepens your dissatisfaction, provides services you’d rather be without. In other words, a bad is something it costs (money, let’s say) to get rid of. For a normal good, the first unit of that good is put to its highest valued end on one’s value scale. The second unit is put the second highest valued end. Etc. And the nth unit is assigned the least important job. With bads its the reverse. Suppose it takes $10 to neutralize one unit of a bad (e.g., dispose of 1 pound of pollution). Then the first $10 you spend to free yourself from the first unit of the bad is taken away from the least valued use of your total money stock. For example, now you have to live without that extra cone of ice cream — a trivial pleasure. Spending the next $10 on the second unit of the bad, however, will be equivalent to sacrificing the next-to-last pleasure that this $10 could have bought for you, had you not wanted to eliminate the bad’s influence. And so on, until the last, say 20th unit of the bad is disposed of with the last $10 of the $200 you had. And this last $10 would have been put to the highest valued use of this amount of cash, such as paying a utility bill. It follows that the first unit of the bad is the least unpleasant, and the last unit is, on the contrary, the most hurtful to your wallet, despite the equal price of getting rid of both.