Marginal Benefit vs. Marginal Cost

Marginal Benefit vs. Marginal Cost

Marginal benefit and marginal cost are two measures of how the cost or value of a product changes.

  • The marginal benefit is a measurement from the consumer side. It is the maximum amount of money a consumer is willing to pay for an additional good or service.
  • The marginal cost is a measurement from the producer side. It is the change in cost when an additional unit of a good or service is produced.
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A marginal benefit change in a consumer's advantage if they use an additional unit of a good or service.

A marginal benefit usually declines as consumption increases. For example, the consumer may buy one ring for $100, but only willing to buy another if the second ring is $50. The consumer's marginal benefit reduces from $100 to $50 from the first to the second good.

Producers consider marginal cost, which is the small but measurable change in the expense to the business if it produces one additional unit.

In producing a product, efficiency in productivity can result in making more products in the same amount of time. The cost of raw materials may also go down if it is purchased in bulk, therefore, decreasing the marginal cost.

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