Marginalism

In economics, marginalism is the theory that economic value results from marginal utility and marginal cost (the marginal concepts). Marginalism is the notion that what is most important for decision making is the marginal or last unit of consumption or production. For example, one automobile is very useful for getting around. An additional automobile might be useful in case the first is being repaired, or for spare parts, but it is not as useful as the first. A third automobile has even less utility than the first two. Given the price of cars, one would not expect many people to own three cars because the benefit they receive on the third car would be unlikely to exceed the price.

Related Topics:
Economics - Marginal cost - Marginal concepts

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The theory of marginal utility was independently developed around 1870 by William Stanley Jevons in England, Carl Menger in Austria and Leon Walras in Switzerland. HH Gossen had also posited a connection between value in exchange and marginal utility, but it was ultimately popularised by the three European economists. These advances in economic thought are known as the Neoclassical Revolution (or Marginal Revolution).

Related Topics:
1870 - William Stanley Jevons - Carl Menger - Austria - Leon Walras - Switzerland - HH Gossen

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