Marginalism

Marginalism explains economic choices and prices by examining changes from one additional unit of consumption, production, or input. It treats marginal utility, cost, and productivity as central to decision-making and value.

Marginal utility: The additional satisfaction or benefit from consuming one more unit of a good or service. It supplies the consumer-side measure used to explain choices at the margin.
Marginal revolution: The late nineteenth-century shift toward explaining value and economic decisions through marginal utility and related concepts. It marks the historical emergence of marginalist economic analysis.
Consumer choice theory: The economic analysis of how consumers allocate limited resources among goods and services. It uses marginal utility to describe choices under budget constraints.
Labor theory of value: A family of theories that explains the value of commodities through the labor required to produce them. It contrasts with marginalism's focus on subjective valuation and incremental choices.
Neoclassical economics: A broad economic tradition centered on choice, prices, incentives, and the allocation of scarce resources. Marginalist reasoning became a defining foundation of this later tradition.
Marginal cost: The additional cost incurred by producing one more unit of output. It identifies the extra production cost firms compare with the revenue from another unit.
William Stanley Jevons: A British economist who developed a mathematical theory of utility and value in the nineteenth century. His work made marginal utility central to an influential account of exchange value.
Theory of the firm: The study of how firms choose production, pricing, and input use. It applies marginal revenue and cost to output and profit decisions.
Cost-of-production theory of value: An account of prices that emphasizes the costs required to produce goods. Marginalism instead explains prices through interacting marginal valuations and costs.
Subjective theory of value: The view that an item's economic value depends on how people assess its usefulness or desirability. Marginalism gave this view a formal account through marginal utility.

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