Marginalism

Marginalism is a concept aimed at increasing the marginal benefit while minimizing the marginal costs, by making small incremental changes to the course of action. Marginalism takes an 'ordinal' approach of Economics. The concept of Marginalism is extensively used by small business entrepreneurs and households while taking decisions.

E.g- Suppose a small scale industry employs 10 technicians for production of a given good, for 8 hours a day. If a technician doesn't show up on any given day, it would result in production loss for the industry. The firm can mitigate the loss by asking the other employee to work for few extra hours, in return for a sum paid out of the absent technician's wages. As long as the wage paid to the employee is less than the production loss reduced, the decision is beneficial.

The Marginal benefit derived out of an activity should always be greater than the Marginal cost of the decision made. In the above case, the Marginal cost is the wage paid and the Marginal benefit is the the loss which was mitigated. Marginalism helps policy makers in forming essential economic policies and enables people to think at the margin.