Marginal analysis defined

Marginal analysis examines if the benefit (or profit) from selling one more unit is greater than the cost to produce one more unit or if the profit earned by adding one more employee will be greater than the cost of that additional employee.

Marginal analysis ignores sunk costs - the effects of past investments, or costs, on investments that cannot be recovered - and looks solely at the next dollar earned or spent from this time forward.

Marginal analysis can be applied using financial modeling, which is a representation, or model, of the financial outcomes resulting from a decision or future event.