“Economically relevant valuations are determined by the significance of the last unit added to or subtracted from the total.”

The concept of Marginalism plays an important role in the development of market prices.

In an economic exchange each additional item has less value than the preceding item. This means that when a seller offers a number of the same goods to a buyer the price per unit will decline as the buyer acquires more and more goods. Each additional unit has less value to the buyer. He will, therefore, pay no more on a per unit basis than what he values the last item.

The concept of Marginalism — closely tied to the concept of taste and preferences — can be relatively difficult to explain. It does, however, merit the time to study and understand because it play such an important role in the price discovery process in markets.