Marginal decisions in economics | tutor2u Economics
Study notes

Marginal decisions in economics

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

What is the importance of the margin when making choices? Marginal in economics means having a little more or a little less of something

It refers to the effects of consuming and/or producing one extra unit of a good or service

  • Marginal benefit – is the change in total private benefit from one extra unit
  • Marginal cost – is the change in total private cost from one extra unit

Rational consumers and producers are assumed to calculate the marginal cost and benefit of each decision. Behavioural economics questions and challenges the use of marginal decisions or every choice.

Examples of the marginal concept used in A level economics

Theory of the firm
  • Marginal product - diminishing returns
  • Marginal cost - linked to marginal productivity of variable factors, a variable cost
  • Marginal revenue - the change in revenue from selling an additional unit
  • Marginal profit - the profit on the next unit produced and sold
  • Profit Max - where marginal revenue = marginal cost
  • Revenue Max - an output where marginal revenue = zero, price elasticity of demand = 1
  • Perfect price discrimination - complete separation of the market, the demand curve becomes the MR curve
Labour market
  • Marginal revenue product of labour (MPPL x Price of output)
  • Marginal cost of employing labour
  • Marginal rate of substitution e.g. of labour for capital (or vice versa)
Externalities, Merit & De-Merit Goods, Public Goods
  • Marginal cost of supply
  • Marginal private social
  • Marginal social cost
  • Marginal private benefit
  • Marginal social benefit
  • Marginal abatement cost i.e. cost of reducing C02 emissions by one tonne.
  • Marginal rate of tax
  • Marginal propensity to save
  • Marginal propensity to spend
  • Marginal propensity to import
  • Marginal efficiency of capital (Keynesian investment demand curve)
  • Marginal product applied to the benefits of specialisation and exchange

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 Economics

Beths Grammar School, Bexley

Teaching Vacancies


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

A New Home for tutor2u Resources

We've just flicked the switch on moving all our digital resources to instant digital download - via our new subject stores.

For every subject you can now access each digital resource as soon as it is ordered. This will always be the latest edition of each resource too (and we'll update you automatically if there is an upgraded version to use).

Simply add the required resources to your cart, checkout using the usual options and your resources will be available to access immediately via your mytutor2u account.