Price is the amount a buyer pays to purchase a good or service. It represents the value of that good or service in the market and is determined by various factors including supply and demand, competition, and consumer preferences. Essentially, price reflects what consumers are willing to pay.
On the other hand, marginal cost refers to the additional cost incurred when producing one more unit of a good or service. It takes into account the change in total cost that arises from producing an incremental unit, and it helps businesses determine the cost-effectiveness of increasing production. Marginal cost is crucial for decision-making regarding production levels and pricing strategies.
In summary, while price is what consumers pay, marginal cost is a measure of the cost of production for businesses. Understanding both concepts is essential for making informed economic decisions and for businesses to set prices that cover marginal costs and ultimately lead to profitability.