Esprit Rock

Marginal Analysis refers to an examination of the effects of additions to or subtraction’s from a current situation

Marginal Analysis refers to an examination of the effects of additions to or subtraction’s from a current situation. (Layton, Robinson, Tucker, 2016, p. 35) The term marginal is classified as extra. It therefore helps in deciding between options. In this situation the value of the crops is $80 without adding 1 kg of fertiliser and value rises to $100 if the farmer adds 1 kg of fertiliser per hectare. If the cost of fertiliser is $15 per hectare then the farmer should fertiliser as per the marginal analysis because the profit will increase by $5 with the addition of the fertilisers and therefore the marginal cost will increase every $20 if the fertiliser cost is set up at $15. Therefore according to marginal analysis the farmer should add fertiliser it costs less than $20 per kilogram