Marginal cost is a concept in economics that refers to the additional cost incurred by producing one additional unit of a good or service. It is calculated by dividing the change in total cost by the change in quantity produced.
The formula for calculating marginal cost is:
MC = (ΔTC) / (ΔQ)
Where:
MC = Marginal cost
ΔTC = Change in total cost
ΔQ = Change in quantity produced
To calculate marginal cost, follow these steps:
1. Determine the initial quantity produced and total cost.
2. Increase the quantity produced by one unit and determine the new total cost.
3. Calculate the change in total cost: ΔTC = New total cost - Initial total cost.
4. Calculate the change in quantity produced: ΔQ = 1 (as it increased by one unit).
5. Divide the change in total cost by the change in quantity produced: MC = ΔTC / ΔQ.
The result will give you the marginal cost of producing one additional unit of a good or service.
How to calculate Marginal cost in economics
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