Student videos

Marginal Cost Examples

  • Levels: AS, A Level, IB
  • Exam boards: AQA, Edexcel, OCR, IB, Eduqas, WJEC

In this short video we look at examples of products (goods and services) where the marginal cost is low and contrast with when marginal cost is high.

Marginal Cost Examples

Why is marginal cost an important concept to understand?

Businesses aiming to make profits need to have an indication of the marginal cost of supplying extra output. They can make higher profits providing the marginal cost is less than the marginal revenue.

If the marginal cost of increasing output is low, then a firm might benefit from expanding their production because it will lead to a fall in the average (or unit) cost of supply.

Can marginal cost be hard to measure?

Many firms engaged in mass production do not change their output in single units. They might produce “batches” of extra output e.g. by adding more shifts to their factory production.

It is probably easier to measure marginal cost for “tangible outputs” e.g. an extra barrel of oil or tonne of steel. Harder to accurately calculate the marginal cost of more people using a train service.

Subscribe to email updates from tutor2u Economics

Join 1000s of fellow Economics teachers and students all getting the tutor2u Economics team's latest resources and support delivered fresh in their inbox every morning.

You can also follow @tutor2uEconomics on Twitter, subscribe to our YouTube channel, or join our popular Facebook Groups.

Job board

Teacher of Business and/or Economics

Hills Road Sixth Form College, Cambridge

Teaching Vacancies

Recruitment

Advertise your vacancies with tutor2u

Much cheaper & more effective than TES or the Guardian. Reach the audience you really want to apply for your teaching vacancy by posting directly to our website and related social media audiences.

Find our more ›

Advertise your teaching jobs with tutor2u