Marginal Change (Thinking at the margin)

Per (Tse) Thinking at the margin means considering the additional costs or benefits of a small change in one’s current situation.

The cost associated to a marginal change is called marginal cost
The benefit associated to a marginal benefit is called marginal benefit.
Rational people make decisions by comparing marginal benefits and marginal costs.

Example:
Suppose you are considering watching a movie tonight. You pay $12 a month for a streaming service that gives you unlimited access and you typically watch eight movies a month. How should you calculate the cost when deciding whether to watch another movie? You might think its $12/8 or 1.50, which is the average cost of a movie. However, more relevant for your decision is the marginal cost - the extra cost that you would incur by streaming another film. Here the marginal cost is zero* because you pay the same $12 for the service regardless of how many movies you watch. In other words, at the margin, streaming a movie is free.

*Technically, there is an implicit cost.

Work cited:
Tse, Harry. “Lecture-3 Equilibrium Elasticity.” 2025.