1. Economic Analysis, A Primer
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2. Marginal analysis Marginal analysis states that
As actions change, so do the benefits of a decision
People should ideally choose correct action
First, I would like to explain marginal analysis for this presentation. Economists look at how costs and benefits transform actions and cause small changes.  This is called marginal analysis, and it is perhaps the key concept in economic analysis. It is recognition that people should ideally make a decision based on the incremental gains and losses that result from that decision, and that costs put in should not alter the outcome. In this case, money, time or other things of worth that have been already spent and unredeemable do not change. Marginal analysis, quite simply, balances the additional benefits from an action against the additional cost.

3. Marginal costs and marginal benefits
To appropriately assess marginal analysis
Costs (marginal costs) must not outweigh benefits (marginal benefits)
Do the action until the costs equal benefits, then stop
After this point, costs will be too expensive
In the situation of assessing marginal analysis, optimal performance requires that benefits and costs be equilibrated on the margin. What this means is that if the additional benefit exceeds the additional cost, perform the action. It is reasonable to keep performing the action as long as the benefit exceeds the cost, and to ensure that all excess benefits (those that exceed costs) are accrued, do it until for the last action, the benefits just equal the costs. The benefits from the last action (such as unit of production or consumption) are termed marginal benefits, and the costs from that action are termed marginal costs.

4. Marginal costs Producing goods costs ‘money’
Here, money means cost
Producing more goods costs more money
Increasing production by one more good costs one more unit of money
This is known as “marginal cost”
In economics and finance, marginal cost is the change in total cost that arises when the quantity produced changes by one unit. That is, it is the cost of producing one more unit of a good. If the good being produced is divisible infinitely, so that the size of a "unit" is incredibly small; then assuming the cost function can be differentiated, the marginal cost function is the first result of the total cost function with respect to quantity. This is a lot of math to arrive at the conclusion that the cost is what comes from adding one more item (Sullivan, 2003).
Sullivan, 2003

5. Marginal benefits
As before, marginal benefits are determined by consumer
Customer willing to pay five dollars
Item cost three dollars
Marginal benefit equals two dollars
Marginal benefits are a little more difficult to define. Here we need to understand that the consumer determines the marginal benefit. For instance, if a customer is willing to pay five dollars for an item, and that item cost three dollars to produce, the marginal benefit is two dollars. Furthermore, many economists discuss marginal benefit in terms of utility or value. This may be imagined as when purchasing an automobile. When the auto is new and shiny on the lot, it is worth the most optimal value and the most money. Once you drive the car off the lot, it has already started to decrease in value.

6. Marginal analysis--economics
Marginal analysis important to economics
People want to be satisfied
Businesses want to maximize profit
Marginal analysis helps determine the balance of adding one more action
Individuals and businesses want to achieve the highest level of satisfaction possible. Economists call this maximizing utility. Individuals want to maximize their satisfaction and happiness, while businesses want to maximize profit. Marginal analysis helps businesses and individuals balance the costs and benefits of additional actions---whether to produce more, consume more, or other decisions---and determine whether the benefits will exceed costs, thus increasing utility. Marginal analysis benefits government policy makers, as well. Weighing the costs and benefits can help government officials determine if allocating additional resources to a particular public program will generate additional benefits for the general public (Hall, 2010).
Hall, 2010

7. Marginal analysis—goods & services
Marginal analysis alters the prices for goods and services
This determined by consumer
Customers will not pay an infinite sum for goods or services of interest
Businesses use the theory of marginal cost to help them set a price people are willing to pay
As mentioned earlier, consumers really set the price for what they are willing to pay for desirable goods and services. Marginal analysis comes in to play when the businesses take chances with adding one more benefit or add-on, and that the public will want to pay for it. If an automobile company makes a car with so many bells and whistles that it is way to expensive to produce that the cost will be prohibitively high. Therefore, customers won’t purchase said auto. This is the nature of supply and demand. However, companies do this all the time. The issue becomes if there will be enough people interested in paying the price that it stays profitable.

8. Marginal analysis—efficiency & equity
Products cost different amounts across the country
Florida =  demand for swimsuits; can be made quickly and cheaply
Fargo =  demand for swimsuits; can be made more costly as only a few needed
Equity comes in to play because all people want the option to choose
Marginal analysis can also be used to measure efficiency and equity. For instance, we are all familiar with paying different costs for items depending on where in the country we may be. This can be associated with marginal analysis when you consider that to buy a swimsuit in Florida may cost less than it does in Fargo because the demand by the customer is so low in Fargo. However, in Florida, the demand should be much higher and so the cost to produce and stock this item is not astronomical. Nevertheless, even people in Alaska want certain goods and so they will need to be supplied, although at a higher price.

9. Marginal analysis--economy
Marginal analysis drives the economy
People only willing to spend money on desirable goods
Affect the ultimate cost
Companies want to maximize profit without losing money
Offer goods at highest prices without being too expensive
Marginal analysis is one of the 10 principles of economics, as outlined by Harvard economist Gregory Mankiw in his "Principles of Economics," a popular textbook in many college economics courses. According to Mankiw, one principle that governs how people make decisions is that rational individuals think at the margin. A person, for example, may weigh such decisions as whether to take a vacation, work additional hours or even have one more glass of wine with dinner. Mankiw and other economists contend that rational decision makers take an action only if the additional satisfaction or benefit---known as the marginal benefit---exceeds the added, or marginal, cost of doing so (Hall, 2010).

10. Marginal analysis--example
Individual may want to know if they should work an extra hour
He makes $10/hour
For each increase in pay, consider the amount of cost
Person may choose to work 2 extra hours but not three as costs get too high (fatigue, overwork, time away from family, etc.)
An economic assumption, verified by much experience, shows that for most actions the benefits per unit are falling, while the costs are increasing. Thus, one measure of economic efficiency is that marginal benefits equal marginal costs. At that point, all the units for which benefits exceed costs are used. Too little, and some excess benefits are wasted; any more, and the costs for later units exceed the benefits. These ideas may be used to make all kinds of decisions without too much hardship. Furthermore, we do this automatically all the time. Should I sleep and extra hour if I will be late for work? Should I have another drink if I will be impaired behind the wheel?

11. References
Sullivan, A., Sheffrin, S. (2003). Economics: Principles in action. Upper Saddle River, New Jersey 07458: Pearson Prentice Hall. pp. 111.