Marginal Thinking

The Cost of an Extra Passenger

Rational people can make better decisions by thinking at the margin. For example:

Although the average cost of flying a passenger may be $500, the marginal cost is merely the extra bag of peanuts and a drink. As long as the marginal passenger pays more than the marginal cost, selling him a ticket is profitable.

‘The Economic Way of Thinking’ by Paul Heyne:

Economic analysis is basically marginal analysis. Marginal means additional. Economic theory is marginal analysis because it assumes that decisions are always reached by weighing additional costs against additional benefits. Nothing matters in decision making except marginal costs and marginal benefits.