What is marginal analysis?

Question

answer should base on micro economics

Answer 1

Marginal analysis generally deals with firms decisions on how much to produce. It relates marginal cost, the cost associated with producing one additional unit of a good, to marginal benefit or revenue, the revenue derived from one additional unit of a good. In marginal analysis, it is the goal of the firm to set marginal cost equal to marginal revenue, with a rising marginal cost. The reason for this is that marginal cost graphically is an arc, starting high, then going lower and then heading back up. If production is stopped where marginal cost equals revenue but cost is heading downward, the firm is only incurring a loss.
It has been proven mathematically (but I won't bore you with that here) that where marginal cost equals marginal benefit with rising marginal cost is the point at which profit will be maximized. Thus, this is the point that firms attempt to achieve, and thus is the reason for marginal analysis.

Answer 2

Margin in microeconomics is the difference between two options. It usually involves the option you choose and the NEXT best opiton, not just any other option.

EX: You have three options for Friday night. You rank them in order:

1. hang out with friends
2. stay home
3. go to parents house and visit with aunt betty

You may rank this in order of what you want to do. So the difference, or margin, is the value between hanging out with your friends or staying home. It is this way because you rank stying home higher than going to your parents to see aunt betty.