Key Concepts Of Marginal Analysis Essay

Key Concepts Of Marginal Analysis Essay

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“Marginal analysis involves changing the value(s) of the choice variable(s) by a small amount to see if the objective function can be further increased (in the case of maximization problems) or further decreased (in the case of minimization problems)” (Thomas & Maurice, 2012, pp. 91). Marginal analysis is known as “the central organizing principle of economic theory” for its importance and applicability to many aspects of our daily lives as well as our careers (Thomas & Maurice, 2012, pp. 94). The key concepts of marginal analysis include total benefit, total cost, marginal benefit, marginal cost and net benefit. These concepts all come together to play a significant role in the use of marginal analysis to reach the optimal desired outcome.
Net benefit is highly important in the understanding of marginal analysis. While using marginal analysis, the decision maker is seeking to receive the maximum net benefit from the activities being performed. Net benefit can be calculated by subtracting the total cost of a level of activity from the total benefit of that level of activity. T...

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