Marginalism  

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Kunstformen der Natur (1904) by Ernst Haeckel
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Kunstformen der Natur (1904) by Ernst Haeckel

Marginalism is a theory of economics that attempts to explain the discrepancy in the value of goods and services by reference to their secondary, or marginal, utility. The reason why the price of diamonds is higher than that of water, for example, owes to the greater additional satisfaction of the diamonds over the water. Thus, while the water has greater total utility, the diamond has greater marginal utility.

Although the central concept of marginalism is that of marginal utility, marginalists, following the lead of Alfred Marshall, drew upon the idea of marginal physical productivity in explanation of cost. The neoclassical tradition that emerged from British marginalism abandoned the concept of utility and gave marginal rates of substitution a more fundamental role in analysis. Marginalism is an integral part of mainstream economic theory.

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Unless indicated otherwise, the text in this article is either based on Wikipedia article "Marginalism" or another language Wikipedia page thereof used under the terms of the GNU Free Documentation License; or on original research by Jahsonic and friends. See Art and Popular Culture's copyright notice.

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