Marginal analysis

Marginal analysis is a decision-making tool that evaluates the additional benefits and costs of a small change in activity. It helps determine whether to increase, decrease, or maintain an action based on whether the extra benefit outweighs the extra cost. For example, a business might decide whether producing one more unit of a product is worthwhile by comparing the additional revenue against the additional costs. This approach ensures resources are used efficiently, focusing on actions that provide the greatest net benefit.