Marginal Analysis refers to an examination of the effects of additions to or subtraction’s from a current situation

Marginal Analysis refers to an examination of the effects of additions to or subtraction’s from a current situation. (Layton, Robinson, Tucker, 2016, p. 35) The term marginal is classified as extra. It therefore helps in deciding between options. Therefore according to marginal analysis the farmer should add fertiliser it costs less than $20 per kilogram because the marginal cost is $20. In this situation the value of the crops is $80 without adding 1 kg of fertiliser and value rises to $100 if the farmer adds 1 kg of fertiliser per hectare. If the cost of fertiliser is $15 per hectare then the farmer should fertilise as per the marginal analysis because the profit will increase by $5 with the addition of the fertilisers and therefore the marginal cost will increase every $20 if the fertiliser cost is set up at $15.