Introduction • Marginal analysis is a means of examining costs and revenue to determine the optimum level of input. • There are two types of marginal analysis: – Break-even analysis. – Profit maximization – this helps us figure out how much should be supplied at each price.
Step 1: The Production Schedule • The first step in marginal analysis is to develop a production schedule and calculate marginal product. • For explanation of the production schedule, see notes on the Law of Variable Proportions.