The Business Simulation Game

What is the marginality of a business?

One of the most important terms in virtual economy games is marginality. The marginality of a service, product or other project is the difference between the cost of finished products and the cost price, that is, the cost of their production. In addition, it shows the profit received from the sale of a unit of goods. The indicator determines the efficiency of the company.

 

Economy simulation : types of products by marginality

 

Products can be divided into three  major categories:

 

  • Low margin. This category includes essential products. The main difference is a large number of competitors and a low mark-up from 10% to 20%.
  • Average margin. Here, the company  selling the product sets a mark-up of 50%.  The sale of such products is  slower and in smaller volumes.
  • High-margin. In this case, a high margin within the limits of 300-500% does not affect the stable demand for products. 

Every manager must constantly monitor marginality. This will allow you to assess the success of doing business. If high marginality is confirmed from year to year, it means that the right business strategy is being used.