Economists use the term marginal changes to describe small incremental adjustments to an existing plan of action.
Keep in mind that margin means edge, so marginal changes are adjustments around the edges of what you are doing.
In many situations, people make the best decisions by thinking at the margin. People make decisions by comparing the marginal benefit with the marginal cost.
For every economic decision that you make, you need to look at the marginal return for that decision.
A rational decision-maker takes action if and only if the marginal benefit of the action exceeds the marginal cost. 1 st Scenario Imagine a working college student studying in UST. He works at McDonalds for his own tuition fee. When given too much work or school related tasks, instead of quitting his job at McDonalds, he simply cuts back a little on his work hours. He did not quit, but instead Adjusted his schedule to meet the current situation. 1 st Scenario
Instead of quitting his job, he thought of ways to adjust his time to manage both his job and his academics.
Marginal Benefits: Gets money for expenses Gets job experience
Marginal Cost: Stress 2 nd Scenario Think of a Broadway show at New York. They dont always get a full house, sometimes, they face empty seats. So thinking at the margin they decide to bargain with the public and sell them the seats at half the price some hours before the show instead of having empty seats in the show. Adjusting the tickets price actually gains the theater more revenues because even if its earning them 50% of the original cost, at least they earned something. 2 nd Scenario
Sold tickets for half the original price so people who couldnt afford the tickets may watch.
Marginal Benefits: People who couldnt afford before can buy. Earned at least 50% of their target sales.
Marginal Cost: Gets only 50% of their target sales.
Additional example: Suppose that flying a 200-seat plane across the country costs the airline Rs. 1,000,000, which means that the average cost of each seat is Rs. 5000. Suppose that the plane is minutes from departure and a passenger is willing to pay 3000 for a seat. Should the airline sell the seat for 3000? In this case, the marginal cost of an additional passenger is very small. Why is water so cheap while diamonds are expensive? Because water is plentiful, the marginal benefit of an additional cup is small. Because diamonds are rare, the marginal benefit of an extra diamond is high.