🔎 What does "Marginal" mean - review MU, MC, MP, MB, etc.

Marginal means that we are considering the impact of one additional item.

• Marginal Cost refers to the additional cost when a firm makes one more item. (Lecture 5)
• Marginal Utility refers to the additional satisfaction we get when we consume one more unit of a good. (Lecture 2)
• Marginal Product refers to the additional number of units a firm can produce if it adds one more unit of some input such as capital or labor. (Lecture 5)
• Marginal Benefit refers to the additional benefit that someone gets by consuming a good. (Lecture 9)
• In section, we talked about the marginal profit of producing one more unit ($P - MC$)
• In a problem set question we dropped, we referred to the marginal revenue product of labor, which is the additional value by hiring one more unit of labor.

In general, whenever you calculate marginal something, the formula will be $\frac{\Delta \text{something}}{\Delta \text{something else}}$. For example,

$$MC = \frac{\Delta C}{\Delta q}$$ $$MU_X = \frac{\Delta U}{\Delta X}$$ $$MP_L = \frac{\Delta q}{\Delta L}\frac{\Delta q}{\Delta K}$$

In general, we figure out how much to consume or produce by looking at marginal quantities. We can think of this as cost benefit analysis as we look at consuming/producing an additional unit of the good.

If $MB > MC$, then it is good to produce/consume an additional unit, and we should do more.

We keep on producing/consuming more until we get to the point where $MB = MC$. At that point, we’ve reached the optimum.

If $MB < MC$, then it is bad to produce/consume an additional unit. We should do less.