A - (A Marginal Approach The standard theoretical model...

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Unformatted text preview: (A) Marginal Approach: The standard theoretical model used in economics is also called a marginal method or approach. This is because all optimizing decisions are taken ’at the margin’ under this method. Margin or marginal change means infinitesimally small changes in an economic entity under consideration, such as utility , cost, factor services, wage rate, quantity demanded or supplied, etc. Such a small or marginal change is in fact a mathematical tool used in calculus. In mathematics, the first derivative of any algebraic function is known as ’the rate of change.’ In economics, marginal value or quality serves exactly the same purpose. This can be illustrated as: In each case marginal value indicates the rate of change. With a small variation in the quantity of x, the marginal utility changes at the rate of 2, or with a small change in the...
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