marginal rate

economics

Also known as: marginal tax rate

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Last updated

June 30, 2026

Quick Summary

The term "marginal rate" in economics refers to the additional benefit or cost associated with one more unit of a good, service, or income. This concept is crucial for understanding economic decision-making.

Key applications include:

Marginal Utility: The additional satisfaction a consumer gains from consuming one more unit of a product. As consumption increases, marginal utility typically decreases.1
Marginal Cost: The extra cost incurred to produce one additional unit of output. Businesses may set prices near marginal cost during slow sales periods.2
Marginal Tax Rate: The tax rate applied to an additional dollar of income.3
Marginal Productivity: The value generated by an additional unit of input, such as labor. Companies may pay workers based on their marginal productivity.4
Marginal Efficiency of Investment: The expected rate of return from making additional investments.5

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…pay tax at a uniform marginal rate, while other countries have more steeply rising rate schedules. Higher marginal tax rates make work less rewarding, which tends to reduce work effort. High marginal rates, however, may have less impact in some areas than others, a factor that needs to be considered…
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…pay tax at a uniform marginal rate, while other countries have more steeply rising rate schedules. Higher marginal tax rates make work less rewarding, which tends to reduce work effort. High marginal rates, however, may have less impact in some areas than others, a factor that needs to be considered…
Read More