The marginal profit describes the profit that can be expected for an additional (infinitely small) manufactured product unit.
The marginal profit is calculated using the following derived profit function:
f (x) = sales function - cost function
Any conceivable production quantity for the value x can be inserted into the function of the marginal profit and one always receives the additional profit to be calculated at a corresponding level of production.
Importance of marginal profit
With the help of the marginal profit, a product calculation can be carried out. Such an investigation can provide information about how large the quantity of product units sold must be in order for the break-even point to be reached. Marginal profit can also help determine the output and price of companies.