Marginal Benefit
A marginal benefit is a small change in the consumer’s advantage if they also use additional units of any good or service. A marginal benefit declines when consumers decide to consume more amount of a single good. Another way to understand marginal benefits is to consider the overall satisfaction which a consumer gets from every subsequent addition. One ring will make the consumer very happy, while a second ring might still make her happy but not as much as the first ring. The lessening of the appeal for any additional consumption of a unit is also known as the diminishing marginal utility.
The marginal benefit is also expressed as the total amount in rupees any consumer wants to pay for every purchase. It is the motivation behind all such deals offered by the stores that include marketing promotions.
Marginal Cost
On the opposite side of the spectrum lies the producer of a good or service. The producers consider the marginal cost, which is a small but measurable change that takes place in the expense to a business for producing one additional unit.
If a company captures the economies of scale, the total cost for producing a product declines when the company produces more of the good or service. The workers can then learn how to move from one particular task to the next within as little time as possible. It can also help the factory or manufacturing unit produce more of a product per hour. As more of the footwear get made in the same period, the total cost of the factory gets further distributed over more number of units which leads to a fall in the total cost for producing each unit of a product. The overall cost of materials may also go down when more units of a product or service are made, and the total materials are also purchased in bulk which leads to a decrease in the marginal cost.
The cost-benefit from this approach also has a ceiling. The buying materials in bulk can also lead to pushing the total price down only to an extent, and the production within a factory can also go up to a particular level before the workers and machines get exhausted. It means that a new factory must also get built and new workers should be hired. Building any new factory is only profitable in case the overall consumer demand continues to rise for a new product or service.
Difference between Marginal Benefit and Marginal Cost
Both marginal benefit and marginal cost have particular implications, and it is important to understand that there are particular uses of these concepts. However, there are also major points of difference between marginal benefit and marginal cost, and we should focus on those points below to get a deeper perspective of these two instruments:
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Marginal benefit is defined as the highest cost that a consumer might pay for the purchase of any additional unit of a product. |
Marginal cost is defined as the measurable expense change that the businesses have in case they produce any additional unit of a product or service. |
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In case of the increase in consumption of a product or service, the marginal benefit of the commodity will decrease. |
In case of the increase in consumption of a product or service, the marginal cost of the commodity may or may not decrease. |
Conclusion
There are a number of points of difference between marginal benefit and marginal cost. But both of them perform a very crucial role in the production of goods and services. They have an important part to play in the overall development and growth of the economy of our country, both in the short as well as the long run.
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