marginal cost pricing

In economics, the setting of a price based on the additional cost to a firm of producing one more unit of output (the marginal cost), rather than the actual average cost per unit (total production costs divided by the total number of units produced). In this way, the price of an item is kept to a minimum, reflecting only the extra cost of labour and materials.

Marginal cost pricing may be used by a company during a period of poor sales with the additional sales generated allowing it to remain operational without a reduction of the labour force.