Marginalism

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Summary

Marginalism is a theory of economics that attempts to explain the discrepancy in the value of goods and services by reference to their secondary, or marginal, utility.

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foundational theory for opportunity cost
Marginalism provides the analytical tools to evaluate the cost of the 'next' unit of choice, which is essential for calculating opportunity costs.
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theoretical framework that superseded cost-based theories
Marginalism shifted the focus of value theory from the total costs of production to the utility of the last unit consumed, effectively rendering the cost-of-production theory obsolete for explaining price formation.
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Analytical tool adopted by the Austrian School
The school uses marginal utility to explain price formation and consumer behavior, moving away from classical cost-of-production theories.
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Facts