Question

What is "Marginal Utility"?

Hint:

Think of eating pizza slices. The first slice gives you a lot of satisfaction (high MU). The second slice is still good, but a bit less satisfying (lower MU). By the fifth slice, the additional satisfaction might be very low or even negative (diminishing MU).

Answer 1

Step 1: Understanding the Concept:
The question asks for the definition of Marginal Utility, a core concept in the theory of consumer behavior.

Step 2: Detailed Explanation:
Marginal Utility (MU) is the additional satisfaction or utility that a consumer gains from consuming one more unit of a good or service. The word 'marginal' in economics refers to the change associated with an additional unit.
The formula for marginal utility is: \[ MU_n = TU_n - TU_{n-1} \] Where: \begin{itemize} \item \(MU_n\) is the marginal utility of the \(n^{th}\) unit. \item \(TU_n\) is the total utility from consuming \(n\) units. \item \(TU_{n-1}\) is the total utility from consuming \(n-1\) units. \end{itemize} A key principle related to marginal utility is the Law of Diminishing Marginal Utility, which states that as a consumer consumes more and more units of a commodity, the marginal utility derived from each successive unit goes on diminishing.

Step 3: Final Answer:
Marginal Utility is the extra satisfaction a consumer gets from consuming one additional unit of a commodity.