marginal utility

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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 ?
Finally, the two types are also assumed to differ in the marginal disutility of working a given number of hours; this difference is calibrated so that the two types choose to work the same number of hours in steady state, despite their differing marginal utilities of income.
An inference is that the changes in marginal utilities did not offset each other.
where the left-hand side gives the value of insurance measured by the difference in marginal utilities of income, and the right-hand side gives the incentive or distortions from the benefit level.
In standard application, RPL yields distributions of marginal utilities, leaving analysts to produce WTP distributions by dividing the distributions of attribute coefficients by the distribution of the alternative cost coefficient.
Since marginal utility is nonlinear, the average of investors' marginal utilities of consumption is not generally the same as the marginal utility of average consumption.
Moreover, because of the existence of cross-border pollution, the relevant Samuelson rule accounts not only for the marginal willingness to pay for pollution abatement within the emitting country, but also for the marginal willingness to pay for it in the other country, weighted by the relative marginal utilities of income.
However, the different marginal utilities from holding money also dictate whether they actually hold more money or not.
Hence, the statements made above about marginal utilities should not be confused with the total or average monetary service flow produced by an asset.
With any other relationship between the marginal utilities of consumption in the two periods, the consumer could increase his welfare by changing his level of saving.
The second is where the marginal utilities of consumption are the same for each claimant and are the same across all states of default.
3) They are the marginal utilities of the money-budget and time-budget, respectively, whose ratio, (4) [mu]/[lambda] [equivalent to] [V.
Such taxpayers' expected marginal utilities of income fall with the amount of uncertainty, thus reducing their welfare cost of parting with a dollar.