Perhaps, it is the most important concept in the analysis of economic activities. The marginal analysis theory states that individual should make a decision based on the incremental gains and losses that emerge from that decision. In a simplistic term, the marginal analysis balances the additional costs and benefits, derived out from taking a decision. Be it a student deciding whether to revise the chapters once more, or a producer whether to expand or stop production, optimal choice requires that costs and rewards should be equilibrated on the margin. Till the time additional benefit exceeds additional cost, the individual or the firm has to continue taking action so as to ensure that all excess benefits are accrued and vice versa. (Washington State University, N.D.).
Marginal analysis is the study of the costs and benefits of the next unit of a good or a factor of production. The aim of the individual or a firm is to maximize net benefits (NB), which is equal to total benefits (TB) less total costs (TC). (i.e., NB=TB-TC). In order to obtain the marginal change, we can change the control variable, say, quantity of goods purchased, amount of goods actually produced, quantity of an input used, etc. Marginal analysis focuses upon whether the control variable should be increased/decreased by one more units or not. The two concepts through which the marginal analysis is done are marginal costs and marginal benefits. Marginal costs are the addition to total costs if one additional unit of the control variable is added. On the other hand, marginal benefits are the addition to the total benefits if the control variable increases by one additional unit. When the marginal benefit rise above marginal costs, the net benefits rise with every unit increase in the control variable. Therefore, more marginal units of the control variable should be added till the marginal costs and marginal benefits are equalized. On the other hand,
The elementary theory of economics says that we can not get everything that we want to. In fact, consumption of all goods and services involves some opportunity costs. In…
This paper aims to: explain what action a profit-maximizing firm takes if marginal revenue is less than marginal cost; define the following three terms
(elasticity of Demand; cross-Price Elasticity; income Elasticity) explains the elasticity coefficient for each of three terms.
People are neither purely rational nor purely self-interested. Advertisement disproves that people are rational: Fallacious appeals are used constantly, and people buy things for haphazard reasons with limited information. People also are not purely self-interested: They buy for friends and family, give to charity, etc.
World Economy: Neoliberalism. News around the globe always contains the headlines regarding the world economy and the presence of a crisis. Economic downturns, turmoil and collapse have been reported throughout history. As the world changes, economy also changes.
According to the study conducted all the students attending college do not have to earn for their expenses. Sometimes students are dependent on their parents who take the responsibility of paying for all of their son’s or daughter’s expenses. Attending college and pursuing a degree course also requires a student to study harder and appear for examinations.
Therefore, health economics addresses the value, efficiency, availability, scarcity of healthcare, and the methods of bridging the scarcity (Guinness & Wiseman, 2011). This follows specific economic principles, disciplines, and economic concepts that relate to choices regarding health and health care.
This curve shows us the number of units of a product that consumers are willing to purchase at a certain price. The number of units is multiplied by the price to get total revenue. Total revenue is important in determining
This paper will discuss two peer reviewed journal articles on marginal analysis.
In this article, Donald Rudow uses marginal analysis to evaluate Gushan Environmental Energy Ltd’s (GU) diversification into recycled copper business, away from biodiesel fuel segment which
Their findings act as a source of economics and provide inspiration to organisations and governments to develop policies in order to regulate markets. In this context, it can be observed that mainstream economics is a central aspect of study in all
2. In terms of marginal revenue and marginal cost, the profit maximizing quantity is the one where the marginal revenue equals the marginal cost. When the company goes on increasing the quantity, the marginal revenue keeps on increasing as
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