Business, Legal & Accounting Glossary
Marginal in economics has two interpretations: additional, and subsistence. Marginal revenue, marginal cost, marginal product and marginal utility are terms used often in economics. Marginal distribution and marginal probability are terms associated with statistical studies.
Production of a commodity is multiple functions of a number of inputs like land, capital, labour, availability of raw materials, tastes and preferences of consumers. In microeconomics, in the short run, the output is directly related to labour and capital employed. Marginal product is an additional increase in total output by increasing a unit of a definite input keeping other variables constant. For example, the marginal productivity of labour would imply, an increase in total output resulting from an increase in a unit of labour, with other inputs remaining unchanged. Alternatively, marginal productivity also indicates additional units of labour needed to produce one additional unit of concerned commodity.
Marginal revenue is the increment in revenue from selling one additional unit of concerned commodity. For instance, if 100 units can be sold @ $15 and 101 units @ $14, the marginal revenue from selling 101st unit = (100 x 15) – (101 x 14) = 1500 – 1414 = $ 86.
Marginal revenue is an important parameter for manufacturing units, since the corresponding output where marginal revenue and marginal cost equal is the optimal level of production.
Similar to marginal revenue, marginal cost is the incremental total cost in producing an additional unit of commodity. Marginal cost varies from industry to industry and from one product to another. For a manufacturing organization, profit is maximized where marginal cost equals marginal revenue. MC initially falls resulting from economies of scale and subsequently increases because of diseconomies of scale.
To help you cite our definitions in your bibliography, here is the proper citation layout for the three major formatting styles, with all of the relevant information filled in.
Definitions for Marginal are sourced/syndicated and enhanced from:
This glossary post was last updated: 28th March, 2020 | 0 Views.