Marginal utility
(Redirected from Marginal benefit)
Marginal utility is a concept in economics that refers to the additional satisfaction or benefit (utility) that a consumer derives from consuming one more unit of a good or service. It is a cornerstone of microeconomics, particularly in the analysis of consumer choice and demand. The principle of marginal utility is used to explain how individuals make decisions to allocate their resources most efficiently.
Concept[edit | edit source]
The concept of marginal utility is based on the understanding that the utility or satisfaction a consumer gets from consuming goods or services decreases as the quantity consumed increases. This phenomenon is known as the law of diminishing marginal utility. For example, if a person is very thirsty, they derive a high utility from drinking the first glass of water, but the utility gained from consuming subsequent glasses is likely to decrease with each glass.
Calculation[edit | edit source]
Marginal utility is calculated as the change in total utility divided by the change in the quantity of the good or service consumed. Mathematically, it can be expressed as:
- MU = ΔTU / ΔQ
where MU is marginal utility, ΔTU is the change in total utility, and ΔQ is the change in quantity consumed.
Importance[edit | edit source]
Understanding marginal utility helps in explaining consumer behavior in the market. It is fundamental in determining the demand curve, which shows the relationship between the price of a good and the quantity demanded. The concept also underpins the theory of indifference curves and budget constraints, which are used to analyze consumer choices in a more detailed and nuanced way.
Applications[edit | edit source]
Marginal utility has applications beyond consumer choice and demand. It is also used in other areas of economics, such as in the theory of marginal utility of income, which suggests that the utility gained from an additional dollar of income decreases as income increases. This concept has implications for understanding income distribution, taxation, and welfare economics.
Criticism and Limitations[edit | edit source]
While the concept of marginal utility is widely used, it has faced criticism. One of the main criticisms is the difficulty of measuring utility, as it is a subjective experience. Additionally, the assumption of rational behavior in consumer choice has been questioned, with behavioral economics providing evidence that consumers do not always make decisions that maximize their utility.
Conclusion[edit | edit source]
Despite its limitations, the concept of marginal utility remains a fundamental part of economic theory, providing valuable insights into consumer behavior, market demand, and the allocation of resources.
Search WikiMD
Ad.Tired of being Overweight? Try W8MD's physician weight loss program.
Semaglutide (Ozempic / Wegovy and Tirzepatide (Mounjaro / Zepbound) available.
Advertise on WikiMD
WikiMD's Wellness Encyclopedia |
Let Food Be Thy Medicine Medicine Thy Food - Hippocrates |
Translate this page: - East Asian
中文,
日本,
한국어,
South Asian
हिन्दी,
தமிழ்,
తెలుగు,
Urdu,
ಕನ್ನಡ,
Southeast Asian
Indonesian,
Vietnamese,
Thai,
မြန်မာဘာသာ,
বাংলা
European
español,
Deutsch,
français,
Greek,
português do Brasil,
polski,
română,
русский,
Nederlands,
norsk,
svenska,
suomi,
Italian
Middle Eastern & African
عربى,
Turkish,
Persian,
Hebrew,
Afrikaans,
isiZulu,
Kiswahili,
Other
Bulgarian,
Hungarian,
Czech,
Swedish,
മലയാളം,
मराठी,
ਪੰਜਾਬੀ,
ગુજરાતી,
Portuguese,
Ukrainian
Medical Disclaimer: WikiMD is not a substitute for professional medical advice. The information on WikiMD is provided as an information resource only, may be incorrect, outdated or misleading, and is not to be used or relied on for any diagnostic or treatment purposes. Please consult your health care provider before making any healthcare decisions or for guidance about a specific medical condition. WikiMD expressly disclaims responsibility, and shall have no liability, for any damages, loss, injury, or liability whatsoever suffered as a result of your reliance on the information contained in this site. By visiting this site you agree to the foregoing terms and conditions, which may from time to time be changed or supplemented by WikiMD. If you do not agree to the foregoing terms and conditions, you should not enter or use this site. See full disclaimer.
Credits:Most images are courtesy of Wikimedia commons, and templates Wikipedia, licensed under CC BY SA or similar.
Contributors: Prab R. Tumpati, MD