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This article mainly explains "what is the marginal effect". The content of the explanation is simple and clear, and it is easy to learn and understand. Please follow the editor's train of thought to study and learn "what is the marginal effect".

What is the marginal effect?

Marginal effect is derived from a concept in economics.

It refers to the degree of additional satisfaction for each additional unit of consumer consumption of an item. Margin means extra increment. In the marginal effect, the independent variable is the consumption of an item, while the dependent variable is the degree of satisfaction or utility, and the change of utility caused by the additional change in consumption is the marginal effect.

What is the diminishing marginal effect?

When we listen to experts do investment analysis, we often hear the words diminishing marginal effect and decreasing marginal cost. Today we are going to talk about what these words mean.

The marginal effect means that as the investment becomes higher and higher, reaching the margin of meeting the demand, the income will be less and less. Just like we sleep and eat, 8 hours of sleep every day is enough, if we sleep 10 hours, 12 hours will become more and more confused. When hungry, eat a bowl of rice, feel very satisfied, and then eat three bowls of rice will be uncomfortable. These are called diminishing marginal effects.

For example, when we buy a car, when we have the strongest desire to buy a car? It must have been when there were no cars. Because there are very few people who own cars, and then everyone has money, and the demand for cars is growing rapidly, automobile companies ushered in a wave of dividend period. But now that cars have become popular, automobile companies are facing the problem of diminishing marginal effects. If you already have two cars, you will certainly choose to spend money on upgrading the performance of the car instead of buying two more cars. So the diminishing marginal effect will eventually force the supply side to upgrade, and then lead to the upgrading of consumption.

What is diminishing marginal cost?

After talking about the diminishing marginal effect, let's talk about the diminishing marginal cost. Marginal cost refers to the total cost increment brought about by each production of a new product.

For example, if you want to open a milk tea shop, the equipment you need to buy and the rent you need to pay are all fixed.

If you sell only one cup of milk tea a day, the cost of this cup of milk tea is equivalent to that of the whole store. But the more milk tea you sell, the lower the cost of each cup of milk tea will be. if you can sell 1000 cups of milk tea a day, then the cost per cup of milk tea will be very low, which is called diminishing marginal cost.

That is, the larger the production scale, the smaller the unit production cost.

To put it simply, when the company's products sell well, the larger the production scale, the smaller the unit production cost.

Marginal cost in Software Development

Software system value is mainly divided into behavior value and architecture value.

Business value (core value)

Implementation of requirements and business availability guarantees (functional bug, performance, stability)

Architectural value

When requirements change, the cost of software change is low and controllable.

Thank you for your reading. the above is the content of "what is the marginal effect". After the study of this article, I believe you have a deeper understanding of what the marginal effect is, and the specific use needs to be verified in practice. Here is, the editor will push for you more related knowledge points of the article, welcome to follow!

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