Chapter 7: Problem 10

Define marginal utility. (LO1)

Short Answer

Expert verified

Marginal utility is defined as the change in total utility resulting from the consumption of an additional unit of a good or service. In other words, it is the extra satisfaction gained by the consumer when they decide to consume one more unit of a product or service. For example, if a person gains satisfaction from eating a slice of pizza and decides to eat another slice, the marginal utility is the additional satisfaction obtained from consuming that second slice.

Step by step solution

Understand the concept of utility

In economics, utility is a measure of the satisfaction or happiness a consumer receives from consuming goods or services. In simpler words, it is the level of satisfaction gained from the consumption of a particular product or service.

Learn about marginal utility

Marginal utility is the additional satisfaction a consumer receives from consuming one more unit of a good or a service. It reflects the change in total utility by the consumption of an incremental unit of a product or service.

Define marginal utility

Marginal utility can be defined as the change in total utility resulting from the consumption of an additional unit of a good or service. It is the extra satisfaction gained by the consumer when they decide to consume one more unit of a product or service.

Provide an example

To understand marginal utility better, let's consider an example. Suppose a person is hungry and decides to eat a slice of pizza. The satisfaction they gain from consuming that slice is their total utility. Now, if they decide to eat another slice, the additional satisfaction from consuming the second slice is the marginal utility of that slice. In this example, the most significant aspect of marginal utility that can be understood is that it helps the consumer determine how the satisfaction from consuming a product or service changes with the consumption of additional units. So, to summarize: Marginal Utility = Change in Total Utility / Change in Quantity of a good or service consumed

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