AP Micro & MacroCore Economic Concepts
Marginal Analysis
Marginal analysis is the process of analyzing the additional benefits and costs arising from a change in an activity, used to make optimal decisions.
Marginal analysis involves comparing the marginal benefits and marginal costs of an activity to determine the optimal level of that activity. As long as the marginal benefit exceeds the marginal cost, the activity should be increased. The optimal point is reached when MB = MC. This concept is used in many economic decisions, such as a firm's production level or a consumer's purchase decisions.
Formula / Example
MB = MC