Allocating Resources Using the Idea of Marginal Cost

Abstract

This activity is designed to have students develop the idea of the equimarginal principle. This principle focuses on using the idea of the marginal cost to determine how to allocate a production target among multiple locations so that the target production is achieved at the minimum cost. This is done using the marginal cost concept. The activity is done in teams in a classroom environment. The equimarginal principle is broadened in subsequent activities so that it can be applied in an economic policy environment.