Thinking at the Margin

Marginal analysis is all about making decisions one step at a time. Instead of looking at the big picture, you focus on the additional (marginal) benefit and the additional cost of your next choice.

How It Works

Rational decision-making means comparing the marginal benefit (extra gain) to the marginal cost (extra expense). If the benefit is greater than the cost, it's a good idea to go ahead!

Everyday Choices

We use marginal analysis all the time, like deciding whether to have another slice of pizza or another hour of studying.

Decision-Making in Action

Businesses use marginal analysis to decide how much to produce. If the extra revenue from making one more product is greater than the extra cost, they keep producing.

Key Takeaway

Making smart choices means always weighing “one more” of something. That’s marginal analysis!