Marginal utility

The change in total satisfaction as a result of consuming one additional unit of a specific good or service.

Marginal Utility

In economics, the level of satisfaction a person derives from a good or service. Marginal utility is inherently subjective and thus difficult to measure, but it is important to determining how much supply of a product the market can handle without diminishing demand. Historically, it has been thought that one can quantify the marginal utility of each unit, but some economists disagree with this. See also: Austrian school, Law of Diminishing Marginal Utility.

marginal utility

the increase in satisfaction (UTILITY) a consumer derives from the use or CONSUMPTION of one additional (incremental) unit of a good or service in a particular time period. For example, if a consumer, having eaten three bars of chocolate, then eats a fourth bar, his TOTAL UTILITY will increase, and if he goes on to eat a fifth bar, his total utility will increase further. However, the marginal (incremental) utility derived from consuming the fifth bar of chocolate would tend not to be as great as the marginal utility from consuming the fourth bar, the consumer experiencing DIMINISHING MARGINAL UTILITY as he becomes sated with the product.

Most goods and services are subject to diminishing marginal utility, with consumers being prepared to pay less for successive units of these products since they are yielding lower levels of satisfaction. This explains why the DEMAND CURVE for such products slopes downwards. See CARDINAL UTILITY, ORDINAL UTILITY, CONSUMER UTILITY, CONSUMER EQUILIBRIUM, PARETO OPTIMALITY, PARADOX OF VALUE.

Collins Dictionary of Economics, 4th ed. © C. Pass, B. Lowes, L. Davies 2005

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References in periodicals archive

In the course of that notable integration of monetary theory and "micro" marginal utility theory, Mises was one of the very first to realize that subjective valuations of the consumer (and of laborers) on the market are purely ordinal, and are in no way measurable.

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At this point, Samuelson observes, the concepts of 'utility' and 'marginal utility' collapse due to the fact that they are empty terms, adaptable to any circumstances and thus theoretically useless (Samuelson 1977: 92ff.).

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For both Pacific halibut and Chinook salmon trips, there was a decreasing positive mean marginal utility of the second fish in the bag limit ($55 and $40, respectively), while for coho salmon the mean marginal values of both the increase to 4 fish from 3 fish and to 6 fish from 4 fish in the bag limit were not different from zero statistically.

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Also, to ensure that individuals are responding based on state dependence in the marginal utility of consumption rather than on differential expectations about life expectancy, the question is clear that health and lifespan are not affected by the state in which they find themselves.

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The only way to make sense of this problem (with or without the words opportunity cost) is to convert goods into the marginal utility per dollar you derive from consuming them.

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We show that in the model with retirement, like in the standard model without retirement, the agent's marginal utility of consumption is a martingale, which means the conditional expected change in its value is always zero.

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