Everyone has heard the phrase “pass the buck.” This is where it comes from.
To articulate, marginal costs and profits relate to a change in how a business takes money in. If it incurrs a new cost or profit, it is called marginal. This is simply an extra or new profit or loss.
Passing the buck is passing it along to clients.
Think of each given business as a spaghetti strainer. It will catch things and let other things pass through. There are many examples, but I’ll go with a simple one: a wood shop.
A wood shop employoee, and usually the shop’s owner, works hard for the money. When they are rewarded with solid profits, they pay themselves. They are due a good wage for their good work.
Passing the buck typically applies to marginal costs. When a company has to pay a new fee, it is very often passed on to the customers. The forms of this marginal cost can take many different shapes.
Say the business must pay for a new insurance to cover accidents with some sort of furniture that is produced. This cuts the profit margin of the given piece of furniture. To attain the same profit on each piece, the price must be increased. The buck has just been passed.
This is how the rich don’t necessarily get richer, but the poor always end up getting poorer.
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