What is Marginal Utility?
Marginal utility is the extra satisfaction a consumer gains from consuming one more unit of a good or service. It's a core idea in economics that explains why demand curves slope downward and why we don't buy infinite amounts of anything.
Marginal utility is the change in total utility from consuming one additional unit: MU = ΔTU/ΔQ. It usually falls as consumption rises — the law of diminishing marginal utility.
Try it: interactive calculator
Step-by-step worked examples
A consumer's total utility from water rises from 20 to 35 utils when going from 1 to 2 glasses. Find the marginal utility of the 2nd glass.
ΔTU = 35 − 20 = 15 utils ΔQ = 2 − 1 = 1 glass MU = ΔTU/ΔQ = 15/1 = 15 utils
Total utility from candy is 42 utils at 3 pieces and 40 utils at 4 pieces. Find the marginal utility of the 4th piece.
ΔTU = 40 − 42 = −2 utils ΔQ = 4 − 3 = 1 piece MU = ΔTU/ΔQ = −2 utils (negative marginal utility)
A shopper's total utility from shirts rises from 80 to 92 utils when buying a 5th shirt. Find the marginal utility.
ΔTU = 92 − 80 = 12 utils ΔQ = 1 shirt MU = ΔTU/ΔQ = 12 utils
Flashcards
Quick quiz
Q1.If total utility rises from 50 to 65 utils when quantity goes from 4 to 5 units, what is the marginal utility of the 5th unit?
Q2.What does the law of diminishing marginal utility state?
Q3.Total utility is maximized when...
Q4.Which is a real-world example of diminishing marginal utility?
The full card deck, worked steps and AI-tutor support for “What is Marginal Utility?” are in Notek — study by hand before your exam.
Common mistakes
Marginal utility and total utility are the same thing. — Correct: Total utility is cumulative satisfaction; marginal utility is the extra satisfaction from one more unit.
Marginal utility always increases with consumption. — Correct: It typically decreases — the law of diminishing marginal utility.
Negative marginal utility is impossible. — Correct: It happens when an extra unit reduces total satisfaction, like a 6th slice of cake making you feel sick.
MU = TU / Q (an average). — Correct: MU = ΔTU/ΔQ — it's the change in total utility, not the average utility per unit.
FAQ
What is marginal utility?
Marginal utility is the additional satisfaction a consumer gets from consuming one more unit of a good or service.
What is the formula for marginal utility?
MU = ΔTU/ΔQ — the change in total utility divided by the change in quantity consumed.
What are examples of marginal utility?
Each extra slice of pizza, additional cup of coffee, or one more item purchased typically yields less added satisfaction than the one before.
How do you calculate marginal utility?
Subtract the previous total utility from the new total utility, then divide by the change in quantity: MU = ΔTU/ΔQ.