Marginal

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  • An incremental or additional change, which may be in the form of cost or benefit. Marginal analysis is a principle that is used to evaluate the efficiency of economic decisions or resource allocation.

    In economics, it is generally assumed that consumers will maximize utility from the consumption of a variety of goods when the marginal utility per dollar is the same for the consumption of the last unit of all goods consumed. This is also a precondition for consumer equilibrium when income is exhausted.

    In a perfectly competitive market, producers will produce until the marginal cost is the equivalent of the marginal revenue. As such, scarce resources will only be used or allocated as necessary.

    Marginal analysis is also used to understand rates of resource substitution—for example, how ...

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