Bava kama 9b - hiddur is an increase of 1/3 of what?

Tosfos suggests that the 1/3 increase is not in cost but in the size of your esrog that if you have one that is the size of a nut, then increase by 1/3. The Beis Yosef explains this idea based on others, that the meaning of Tosfos is that you are only being asked to do this hiddur of a 1/3 if you are in a state where you have the bare minimum of the mitzva. Then you should try to increase 1/3. But if you have a decent size esrog, then no 1/3 increase is necessary.