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Homework answers / question archive / Why is the Marginal theory said to be a revolution in Economics?
Why is the Marginal theory said to be a revolution in Economics?
The revolutionary aspect of marginal theory and analysis is that it provides an explanation for the behavior of consumers and producers. But the marginal theory explains why consumers behave the way they do - they buy more of something until the cost of the next unit exceeds its marginal utility. In addition, marginal analysis of both revenue and costs tells the supplier of a good what level of output to produce in order to maximize profit instead of focusing entirely on revenue. Profit maximization occurs where marginal revenue equals marginal cost - that is, where producing one more unit contributes more to revenue than it costs to make.