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    Microeconomics- Marginals in Economics

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    What is a "marginal" and why is it so important in microeconomics?

    © BrainMass Inc. brainmass.com December 24, 2021, 11:02 pm ad1c9bdddf
    https://brainmass.com/economics/output-and-costs/marginals-microeconomics-529890

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    Marginals in economics just refers to an incremental or additional amount. Most of the time when looking at a marginal change in economics, it is referring to a one unit change in cost, revenue, tax rate, etc. Microeconomics focus on the interaction between consumers and firms. So, normally when dealing with marginals, microeconomics is looking at marginal cost, marginal product, and marginal revenue. If we are talking about marginal cost it would refer to how much total cost changes based on a one unit increase in production. Marginal product refers to how much output increases based on an extra unit of an input. Marginal revenue is how much revenue changes based on one additional unit sold.

    An example of why marginals are important:

    A manager at a coffee shop needs to decide the optimal amount of employees to have working at a given time. There is only so much space for employees to work and only a certain amount of machines to make coffee. If the manager doesn't put on enough employees, then the coffee shop will not be working at its optimal efficiency. On the other hand, if the manager has too many employees on the floor, they will start bumping into each other and some of the employees may be standing around not working. At some point a firm will start to have diminishing returns. Which means at some point the firm will have less productivity for each additional unit of labor. This is an example of marginal product of labor, which is how much output increases based on one additional unit of labor.

    The concept of marginals in economic is basically the same, whether you are dealing with marginal cost, marginal revenue, marginal product, etc.

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    © BrainMass Inc. brainmass.com December 24, 2021, 11:02 pm ad1c9bdddf>
    https://brainmass.com/economics/output-and-costs/marginals-microeconomics-529890

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