What is marginal thinking?

A

Marginal thinking is a process of evaluating whether the cost of one more unit is less than its benefits.

Explanation:

Marginal thinking involves the analysis that goes into decision-making. It means thinking about what consequences will follow after the adoption of a decision. For instance, it is when someone decides how much more or less he is going to utilize something in order to make benefits.

For example, two players, Thomas and Mark, are basketball players, and, hence, they are popular, they get invited to an event. They both should make a choice on the margin. Thomas chooses not to go while Mark does. However, the choice they make on the margin is significant as each decision has an opportunity cost. To Mark, the opportunity and marginal cost of not going to the party are high; therefore, he prefers to have fun and work out later. Thomas chooses to stay home and continue his training. As a result, Mark fails to succeed in a basketball game, while Thomas scores many points. However, rather than learning from his mistakes, Mark continues to live life like there is no tomorrow, and it cost him to end up with a mediocre job, car, house, and ultimately life. By contrast to him, Thomas gets an athletic scholarship in a prestigious university, buys a nice car and house, and gets a job in a big company. The lesson learned is when applying marginal thinking, it is crucial to make a choice what is best.

Making decisions at the margin does have distinct advantages. It leads to a more favorable decision being made according to personal preferences, constraints, and available resources. From an analytical point of view, it makes problems less chaotic as a person is not trying to analyze a million decisions at once.

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