Using an example, explain "marginal analysis" and how it works

An example of marginal cost analysis is when comparing the cost of running an organization's information system with the benefit of that it will bring to the organization. For example, the cost of information for a mini-mart is $1000. This will bring an advantage in that it will increase the speed at which customers are served, and the mini-mart will need fewer employees to work on the many customers. Thus, the mini-mart may increase its sale per day by about three times compared to when it did not have the Information system or POS. Based on the above marginal analysis, mini-mart management can decide to spend the 1000 dollars and increase its sales.

Marginal analysis works by comparing the financial benefit of purchasing or producing an additional service or product to the expenses involved. The costs include any additional labor required, raw material, and merchandise. If the firm will gain more benefits than expenses, then that product is worth the investment.