Economics Part B

Marginal expenditure

Understanding What is Marginal expenditure

The total expenditure required to produce one additional unit of a product. If, for example, the total expenditure required to produce two chairs is $100, and the total expenditure required to produce three chairs is $160, then the marginal expenditure to produce the third chair is $60.

Usually the marginal expenditure goes up with the production of each additional unit of a product (the marginal expenditure on producing the fourth chair will be higher than the marginal expenditure for producing the third chair) as a result of the phenomenon known as: decreasing marginal productivity (see below).

Marginal expenditure555Marginal expenditure