Margin (economics)

This article concerns a concept of economic theory. For discussion of the term “margin” as used in the bourses, see “Margin (finance)”.

In economics, a margin is a set of constraints conceptualised as a border.^[1] A marginal change is the change associated with a relaxation or tightening of constraints — either change of the constraints, or a change in response to this change of the constraints.^[1]

Extensive and intensive margins

Margins are sometimes conceptualized as extensive or intensive:

An extensive margin corresponds to the number of usable inputs that are in some sense employed. For example, hiring an additional worker would increase an extensive margin.
An intensive margin corresponds to the amount of use extracted within a given extensive margin. For example, reducing required production from a given set of workers would decrease the intensive margin.

References

^ ^a ^b Wicksteed, Philip Henry; (1910),The Common Sense of Political Economy Bk I Ch 2 and elsewhere.

Categories

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Margin (economics)