Think at the Margin is a critical concept that businesses can use to optimize their operations and profitability. It involves focusing on the incremental benefits and costs of decisions, rather than solely considering total costs or revenues. By thinking at the margin, businesses can make informed decisions that maximize their financial performance.
Benefit | Example |
---|---|
Increased revenue | Expanding into a new market segment |
Reduced costs | Negotiating lower prices with suppliers |
Improved efficiency | Implementing a new automation system |
Mistake | Consequence |
---|---|
Ignoring marginal costs | Overproduction and excess inventory |
Focusing only on total revenue | Missing out on opportunities for incremental revenue |
Making decisions based on sunk costs | Continuing to invest in unprofitable operations |
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