"The study of variables in terms of the effects that would occur if they were changed by a small amount. For example, rather than analyse whether or not it is in the interest of an individual to spend money on food at all, attention can sensibly be focused on whether or not welfare could be enhanced by spending slightly more or less on food. Nothing better demonstrates the concept than the paradox of value: although water is more necessary to man than diamonds, it has a much lower price. This is because man usually has so much of it that extra water is worthless. This is not true of diamonds (marginal utility). The marginal value of a variable is equivalent to its rate of change or, mathematically, its first derivative. For example, a firm's sales revenue rises as sales increase and this can be plotted on a graph as total revenue. By taking the gradient of the total revenue curve, marginal revenue can be derived, depicting how much extra revenue is gained, from an extra sale, at each different level of total sales. If the marginal revenue is plotted on a graph, total revenue can be derived by finding the area under the marginal-revenue curve up to a given level of sales. The marginal value of a variable lies below the average value of that variable if the average is falling. The marginal value lies above it if the average is rising.

"The margin is important in economics as it is the impact of small changes in variables rather than their level per se that determines whether rational economic agents change them. It is the average level of utility, costs or revenues that tends to determine whether things are consumed or produced at all, but the marginal utility, costs or revenues that determine how much is consumed or produced once a decision to do so at all has been taken." - Marginal analysis. (2003). In G. Bannock, R. E. Baxter, & E. Davis, The Penguin Dictionary of Economics (7th ed.). Penguin.