marginal analysis business definition

Making decisions by comparing the extra benefit with the extra cost of small changes. For example, perhaps a retailer is considering opening her store an hour earlier each morning. Marginal analysis would compare the additional revenues generated by the earlier opening with the extra costs, including labor, electricity, and so forth. The analysis would have to account for the fact that some of the additional sales during the first hour might come from customers who would have made purchases later in the day. Marginal analysis is the proper method of making most business decisions. Also called incremental analysis.