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 ?
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 of consumption:
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 of money.
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.