Final answer:
Residual refers to something remaining after the greater part has gone, and incremental relates to small, gradual additions or changes. The law of diminishing returns signifies that the benefit of adding more resources decreases after a certain point. Marginal analysis helps evaluate these incremental changes, distinct from normative statements that prescribe how things should be.
Step-by-step explanation:
The terms residual and incremental are often used in the context of economics and business. In this context, incremental typically refers to something that is added or gained in small amounts, or the additional cost or benefit associated with producing one more unit of a good or service. The law of diminishing returns relates to incrementality, as it states that as we add additional increments of resources to producing a good or service, there comes a point where the marginal benefit from these increments begins to decline.
Marginal analysis is a technique used in economics to examine decisions at the margin, which involves comparing the benefit of a little more or a little less from the status quo. A normative statement, on the other hand, is a value judgment that expresses how the world ought to be, rather than how it actually is.