Uploaded September 2026 | Updated September 2026, 2 weeks ago
Economists assume that rational decisions are rarely absolute; instead, they are made at the margin. Marginal thinking involves evaluating the additional benefit of one more unit of an activity against its additional cost, while entirely ignoring past sunk costs. A consumer decides to buy a second cup of coffee only if the marginal utility of that specific cup exceeds its price. By focusing strictly on these incremental changes, individuals and businesses can optimise their choices and maximise their economic success.
Economists assume that rational decisions are rarely absolute; instead, they are made at the margin. Marginal thinking involves evaluating the additional benefit of one more unit of an activity against its additional cost, while entirely ignoring past sunk costs. A consumer decides to buy a second cup of coffee only if the marginal utility of that specific cup exceeds its price. By focusing strictly on these incremental changes, individuals and businesses can optimise their choices and maximise their economic success.
