In the subsequent periods, the fall in the marginal utility
of health status in Step 2 applies downward pressure on the marginal utility
of leisure (dash-dotted line, panel 4).
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.
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.
Figure 6 also has the marginal utility
product of boots labour ultimately diminishing on account of the diminishing marginal utility
of boots (as manifested in the downward sloping portion of the marginal utility
product of boots labour).
references to declining marginal utility
and risk aversion.
At the core of the concept of diminishing marginal utility
is the assumption--contrary to ecological economics thinking--that a world with perpetual economic growth is feasible.
Finally, we use (11) to eliminate V/ from the above equation and express it purely in terms of the marginal utility
I reach the rather surprising conclusion that the diminishing marginal utility
argument for reducing income inequality is weaker in the short run than in the long run.
Sacrifice theory and the marginal utility
Under the utilitarian framework, income redistribution within a society will be warranted only if the marginal utility
gained from giving a dollar to the poor is greater than the marginal utility
lost from taking the dollar from the rich--both in terms of lost utility to the rich person and deadweight loss due to changed incentives and bureaucratic costs.
The modification permits marginal utility
, and hence total utility, to be finite when the consumption of computers is zero, implying that the good won't be consumed at a high enough price.
When the consumer is tempted to buy excessively, the marginal utility
(definition: utility gained (or lost) from the consumption of goods or services) of the additional units consumed decreases to a level where the consumer almost gets fed up of the consumption itself and develops a resistance towards the consumption of the whole category.