What is Foolsaurus?

It's a glossary of investing terms edited and maintained by our analysts, writers and YOU, our Foolish community. Get Started Now!


How to Calculate the Marginal Benefit in Finance

Original post by Charlotte Johnson of Demand Media

Marginal benefit is a business finance term that deals with the benefit related to the consumption of an extra amount of a product or service. The marginal benefit is generally equated to the amount that a consumer would be willing to pay for an additional amount of a specific good or service. Marginal benefit is a concept that belongs to the category of marginal analysis, which covers other related topics such as marginal cost.

Contents

Step 1

Write down the actual price of a good or service. For example, Company A may produce product B at a cost of $5.00 per unit.

Step 2

Write down the amount of consumer surplus related to the product or service. This is the amount of money above the actual cost of the product or service that the consumer is willing to pay. In this example, assume that Consumer XY is willing to pay $3.00 more per unit than the actual cost.

Step 3

Add the actual price to the consumer surplus to determine the marginal benefit. In this example, you would add $5.00 plus $3.00 to get a marginal benefit of $8.00.


                   

References

About the Author

Charlotte Johnson is a musician, teacher and freelance writer with a master's degree in education. Johnson has written numerous articles for various websites. She has covered a wide range of topics including health, education, the arts, animals and parenting.


Advertisement