What is Marginal Utility?
Marginal utility is the additional satisfaction or benefit a consumer gains from consuming one more unit of a good or service. It measures how much 'extra happiness' the next item brings.
Marginal utility is the change in total satisfaction from consuming one additional unit: MU = ΔU/ΔQ. It typically decreases as consumption rises (diminishing marginal utility).
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Step-by-step worked examples
Eating pizza slices: 1st slice gives 20 utility, 2nd gives 30 total. Find MU of the 2nd slice.
Total utility at Q=1: 20 Total utility at Q=2: 30 ΔU = 30 − 20 = 10 ΔQ = 2 − 1 = 1 MU = 10/1 = 10 utility units.
After drinking 3 cups of coffee (total: 60 utility), the 4th cup adds 8 units to total (68). What is MU_4?
Total utility at Q=3: 60 Total utility at Q=4: 68 ΔU = 68 − 60 = 8 ΔQ = 1 MU_4 = 8 utility units.
You get 50 utility from 2 books and 55 from 3 books. Is marginal utility falling?
MU of 2nd book: not clear, so skip. MU of 3rd book: ΔU = 55 − 50 = 5 MU falling? Compare to previous MU if known. With only this data, we see MU_3 = 5, which is small; likely falling (typical pattern).
Flashcards
Quick quiz
Q1.Marginal utility measures…
Q2.You get 40 utility from 2 concerts and 55 from 3. MU of 3rd concert?
Q3.Diminishing marginal utility means…
Q4.If MU is negative, what does it mean?
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Common mistakes
Confusing marginal utility with total utility. — Correct: Total utility = cumulative satisfaction; marginal = extra from one more unit.
Thinking MU always stays the same. — Correct: MU typically falls as consumption rises (diminishing marginal utility).
Ignoring that MU can be negative. — Correct: If eating more makes you worse off, MU < 0.
Assuming high price means high MU. — Correct: Price and MU are different—MU is about extra satisfaction, not cost.
FAQ
What is the definition of marginal utility?
The additional satisfaction or utility gained from consuming one more unit of a good or service.
Why does marginal utility decrease?
As you consume more, each extra unit matters less—you're already satisfied, so the next bite/sip adds less joy.
What is the formula for marginal utility?
MU = ΔU/ΔQ — change in total utility divided by change in quantity.
Can marginal utility be zero or negative?
Yes — MU = 0 when an extra unit adds no satisfaction; MU < 0 when more consumption reduces satisfaction.