Marginal Analysis

AAA

DEFINITION of 'Marginal Analysis'

An examination of the additional benefits of an activity compared to the additional costs of that activity. Companies use marginal analysis as a decision-making tool to help them maximize their profits. Individuals unconsciously use marginal analysis to make a host of everyday decisions.


Marginal analysis is also widely used in microeconomics when analyzing how a complex system is affected by marginal manipulation of its comprising variables.

INVESTOPEDIA EXPLAINS 'Marginal Analysis'

For example, if you already exercise five times a week and are thinking about adding a sixth day, you would use marginal analysis to determine whether the benefits of the sixth day, such as additional calories burned, endurance gained and muscle built, would be worth the costs of the sixth day, such as giving up sleeping in on Saturdays, having less energy to do your other weekend activities, and increasing your risk of injury.



RELATED TERMS
  1. Marginal Propensity To Consume ...

    A component of Keynesian theory, MPC represents the proportion ...
  2. Marginal Cost Of Funds

    The incremental cost of borrowing more money to fund additional ...
  3. Monopoly

    A situation in which a single company or group owns all or nearly ...
  4. Marginal Social Cost - MSC

    The total cost to society as a whole for producing one further ...
  5. Marginal Cost Of Production

    The change in total cost that comes from making or producing ...
  6. Marginal Benefit

    The additional satisfaction or utility that a person receives ...
Related Articles
  1. Fundamental Analysis

    How Influential Economists Changed Our ...

  2. Austrian School of Economics, von Hayek
    Economics

    The Austrian School Of Economics

  3. thinkstock|istock
    Economics

    Understanding Supply-Side Economics

  4. Investing Basics

    Economic Indicators That Do-It-Yourself ...

Hot Definitions
  1. Capitulation

    When investors give up any previous gains in stock price by selling equities in an effort to get out of the market and into ...
  2. Turkey

    Slang for an investment that yields disappointing results or turns out worse than expected. Failed business deals, securities ...
  3. Conduit Issuer

    An organization, usually a government agency, that issues municipal securities to raise capital for revenue-generating projects ...
  4. Financing Entity

    The party in a financing arrangement that provides money, property, or another asset to an intermediate entity or financed ...
  5. Hyperinflation

    Extremely rapid or out of control inflation. There is no precise numerical definition to hyperinflation. Hyperinflation is ...
  6. Gross Rate Of Return

    The total rate of return on an investment before the deduction of any fees or expenses. The gross rate of return is quoted ...
Trading Center