How to Calculate Marginal Rate of Increase
The marginal rate of increase measures the change in one variable as a result of a change in another variable. From a business and personal finance viewpoint, the marginal rate of increase is often used to describe changes in cost and revenue. To derive the marginal rate of increase, an elementary knowledge of calculus is usually required.
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Instructions
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Obtain the data needed for your calculation. Let's say you wish to calculate the marginal cost of a firm. You will need data for the firm's total cost for each quantity of output produced. This data is often summarized in the form of a total cost curve. The equation will be in the format where Y represents total cost and X represents quantity.
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Take the derivative of the total variable cost curve by differentiating Y with respect to X. This will give you the marginal cost curve of the firm. Similarly, to find the marginal revenue of a firm, you will need to take the derivative of the total revenue curve.
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Calculate the marginal rate of increase, if you do not have access to the equations for total revenue or total cost. Pick any two quantities of output along with their respective costs (or revenue). To find the marginal rate of increase, divide the difference of total costs (or revenue) by the difference of quantity. For example, if producing 3 units of a good costs $10, and producing 2 of the same unit costs $5, then the marginal rate of increase would be $5, as $5 divided by 1 equals $5.
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