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What is the marginal effect

Marginal effect is a concept derived from economics.

It refers to the additional degree of satisfaction that consumers increase by each additional unit of consumption of a good. Marginal means extra increment. In the marginal effect, the independent variable is the consumption of an article, and the dependent variable is satisfaction degree or utility, and the change of utility caused by the additional change of consumption is the marginal effect.

What is diminishing marginal effect?

When we listen to experts doing investment analysis, we often hear the words diminishing marginal effect, diminishing marginal cost. Today we’re going to talk about what these words mean.

The marginal effect is that as the input gets higher and higher, it reaches the point at which the demand is satisfied, and the revenue is less and less. Just like we sleep and eat, sleep 8 hours a day is enough, if sleep 10 hours, 12 hours will become more and more confused. When hungry, eat one bowl of rice, feel satisfied, then eat three more bowls of rice will be sick. These are all called diminishing margins.

When do we want to buy a car the most? That must have been when there wasn’t a car. Because few people owned cars, the demand for cars grew rapidly as people became rich, and the car companies ushered in a wave of dividends. But now the automobile has been popularized, the automobile enterprise faces the problem of diminishing marginal effect. If you already have two cars, you will definitely choose to spend money on upgrading the performance of your car rather than buying two more. So diminishing marginal effect will eventually force the supply side to upgrade, and then bring consumption upgrade.

What is diminishing marginal cost?

Having said diminishing marginal effect, let’s talk about diminishing marginal cost. Marginal cost is the total incremental cost of each new product produced.

For example, if you want to open a milk tea shop, you need to buy equipment, pay rent, these costs are fixed.

If you only sell one cup of milk tea a day, the cost of that cup of milk tea is equivalent to the cost of the whole store. However, the more milk tea you sell, the lower the shared cost of each cup of milk tea will be. If you can sell 1000 cups of milk tea a day, the cost of each cup of milk tea will be very low, which is called diminishing marginal cost.

That is: the larger the production scale, the smaller the unit cost of production

To put it simply, the larger the scale of production, the smaller the unit cost of production.

Marginal cost in software development

Software system value is divided into behavior value and architecture value.

  • Business Value (Core value)

Implementation of requirements, and business availability assurance (functional bugs, performance, stability)

  • Architectural value

When requirements change, software change costs are low and controllable

Ask a few questions:

  • Is the number of r&d engineers proportional to the amount of code developed?

  • What is the relationship between the number of r&d engineers and the cost of code maintenance?

  • What is the correlation between the number of R&D engineers and the improvement of R&D efficiency?

It turns out that as software complexity increases, the number of engineers increases, but the increase is slow when the amount of code reaches a certain level. But the cost of code maintenance increases exponentially, and engineers become less productive, increasing maintenance costs as requirements change.

For example, performance optimization. “A good programmer should squeeze every last byte of memory” sounds familiar, doesn’t it? But in economics, marginal effect determines that the more optimized a project is, the lower the cost performance will be. It’s easy to overlook the fact that hardware is actually cheaper than programmers.

The classic book the Myth of the Man-month introduces a theory of workload and progress: the man-month

Man-month as a measure of the size of a job is a dangerous and deceptive myth that implies interchangeable numbers and hours of work.

Communication = Training (linear) + communication (n (n-1)/2)

The complexity of the relationship, communication work is very heavy, eat up the time saved by task decomposition, thus, the increase in staff, actually longer rather than shorter progress.

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