We are independent & ad-supported. We may earn a commission for purchases made through our links.
Advertiser Disclosure
Our website is an independent, advertising-supported platform. We provide our content free of charge to our readers, and to keep it that way, we rely on revenue generated through advertisements and affiliate partnerships. This means that when you click on certain links on our site and make a purchase, we may earn a commission. Learn more.
How We Make Money
We sustain our operations through affiliate commissions and advertising. If you click on an affiliate link and make a purchase, we may receive a commission from the merchant at no additional cost to you. We also display advertisements on our website, which help generate revenue to support our work and keep our content free for readers. Our editorial team operates independently of our advertising and affiliate partnerships to ensure that our content remains unbiased and focused on providing you with the best information and recommendations based on thorough research and honest evaluations. To remain transparent, we’ve provided a list of our current affiliate partners here.

What Is Marginal Demand?

Malcolm Tatum
Updated May 17, 2024
Our promise to you
WiseGeek is dedicated to creating trustworthy, high-quality content that always prioritizes transparency, integrity, and inclusivity above all else. Our ensure that our content creation and review process includes rigorous fact-checking, evidence-based, and continual updates to ensure accuracy and reliability.

Our Promise to you

Founded in 2002, our company has been a trusted resource for readers seeking informative and engaging content. Our dedication to quality remains unwavering—and will never change. We follow a strict editorial policy, ensuring that our content is authored by highly qualified professionals and edited by subject matter experts. This guarantees that everything we publish is objective, accurate, and trustworthy.

Over the years, we've refined our approach to cover a wide range of topics, providing readers with reliable and practical advice to enhance their knowledge and skills. That's why millions of readers turn to us each year. Join us in celebrating the joy of learning, guided by standards you can trust.

Editorial Standards

At WiseGeek, we are committed to creating content that you can trust. Our editorial process is designed to ensure that every piece of content we publish is accurate, reliable, and informative.

Our team of experienced writers and editors follows a strict set of guidelines to ensure the highest quality content. We conduct thorough research, fact-check all information, and rely on credible sources to back up our claims. Our content is reviewed by subject-matter experts to ensure accuracy and clarity.

We believe in transparency and maintain editorial independence from our advertisers. Our team does not receive direct compensation from advertisers, allowing us to create unbiased content that prioritizes your interests.

In economics, "marginal demand" is a term that is used to describe how the demand for a good or service is likely to be impacted by a shift in the unit price of a product. This approach is often used to project what would likely happen to sales of a given product if the unit price that consumers pay is either increased or decreased. Using the projection of the marginal demand helps companies determine if making a change one way or the other is likely to result in an improved bottom line, or if the current pricing should remain in place.

Key to understanding marginal demand is having a firm grasp of the degree of supply and demand that currently exists for the products under consideration. Assuming that demand in general is growing, a company that manufactures the products may begin to speculate on what effect a chance in pricing would have on its market share. For example, if the company has relatively few competitors, projecting the price elasticity of demand may reveal that the company has little to nothing to gain from adjusting a price downward. At the same time, the marginal demand that is revealed may also project that making a slight increase in unit price will have no detrimental impact on the number of units that consumers buy, making it possible to increase gross profits without damaging sales figures.

In a more competitive environment, the consideration of marginal demand may provide valuable clues in how a company that must vie for customers against a relatively broad range of competitors must proceed in order to maintain current market share as well as have a chance to increase its share of the limited consumer market. Here, projecting the marginal demand if unit prices are decreased in specified increments can help reveal if the resulting upswing in sales would be enough to offset the loss of profit on each unit sold. If the calculation of marginal demand indicates that the volume of purchases made will increase sufficiently to allow the business to ultimately take in more revenue from that higher volume, the price change may be justified and aid in capturing a greater market share.

Assessing marginal demand is an ongoing task. As conditions within a consumer market shift, companies that do business in those markets must also consider the effectiveness of the current pricing to attract customers and keep the demand within an acceptable range. For this reason, companies tend to evaluate market conditions regularly, consider their current pricing strategies in light of those new circumstances, and then project what would happen if specific changes in pricing are implemented.

WiseGeek is dedicated to providing accurate and trustworthy information. We carefully select reputable sources and employ a rigorous fact-checking process to maintain the highest standards. To learn more about our commitment to accuracy, read our editorial process.
Malcolm Tatum
By Malcolm Tatum
Malcolm Tatum, a former teleconferencing industry professional, followed his passion for trivia, research, and writing to become a full-time freelance writer. He has contributed articles to a variety of print and online publications, including WiseGeek, and his work has also been featured in poetry collections, devotional anthologies, and newspapers. When not writing, Malcolm enjoys collecting vinyl records, following minor league baseball, and cycling.
Discussion Comments
Malcolm Tatum
Malcolm Tatum
Malcolm Tatum, a former teleconferencing industry professional, followed his passion for trivia, research, and writing...
Learn more
WiseGeek, in your inbox

Our latest articles, guides, and more, delivered daily.

WiseGeek, in your inbox

Our latest articles, guides, and more, delivered daily.