marginal utility

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Related to marginal utility: Diminishing marginal utility, Total Utility

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.

References in periodicals archive ?
Expressing the concept this way makes it clear that "willingness to trade-off" becomes "willingness to pay" when it is a marginal rate of substitution with a numeraire good with a fixed constant marginal utility to price ratio.
Hicks replaced the principle of diminishing marginal utility with a diminishing marginal rate of substitution: at a given level in his scale of preference, a consumer is willing to give up less and less of one good in order to consume more of another; one unit of the new good can be substituted for less and less of the previous one.
Focusing on the corrected MNL estimates, we see restaurant patrons had a positive marginal utility of calories, such that for every additional calorie a menu item has, an individual's utility increases by 0.
Lawsky, On the Edge: Declining Marginal Utility and Tax Policy,
As studied by Hall (1978) and many others, (21) implies that at all times prior to retirement the expected change in marginal utility of consumption is zero, i.
Since the marginal utility in the loss state 2 is larger than in nonloss state 1, [U'.
For diminishing marginal utility of income to justify an income transfer, assuming a short-run perspective, the short-run happiness loss to the person losing the income must be less than the short-run happiness gain to the person receiving it.
The economic principle of marginal utility on which sacrifice theory depends is sound.
Similar to the proof of Proposition 1, at the goods market, the marginal utility of consumption in Equation 20 is the same for each shopper across market i, and the following holds for any market i, j [member of] [0,1]:
He noted that Cyprus had decided to reduce its stockpile of land mines "despite being in a situation where the matter of national security is profound" indicating Cyprus' decision that "the marginal utility of anti-personnel mines is greatly outweighed by the human suffering that results from the use of these weapons.