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.
Copyright © 2012, Campbell R. Harvey. All Rights Reserved.

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.
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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
References in periodicals archive ?
(6) The argument is buttressed by reading a number of earlier economists as precursors of marginal utility theory (Kurz 1999, p.
McCulloch (1977) provides a modern, formal treatment of Austrian marginal utility theory.
The differences between the university-taught marginal utility theory and what I had picked up about Marxism earlier on did not worry me.
It also may be asked, in what sense was the empirically untestable marginal utility theory more consistent with reality than the tautological self-evident full-cost theory of relative prices?
1953), von Mises addressed the criticism that his contemporary Karl Helfferich has raised against using marginal utility theory to explain the level of money prices:
Pesch discusses value theory, marginal utility theory, the organic character of the economy, and private property.