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Incremental analysis includes two concepts

Incremental cost

Incremental revenue

IC is the additional cost incurred for additional output. In other words changes in cost due to changes in level of output.

Whereas IR is the additional revenue from additional output or the changes in revenue due to changes in output.

For every business decisions there is IR and IC. In order to determine whether the decision is sound or not we should compare the IC and IR of every decision.

If the IR exceeds the IC, or IR is equal to IC the decision can be assumed as a sound decision.

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Q: What is the incremental concept of managerial economics?
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