The concept of marginal utility emerged in the XNUMXth century to define the additional satisfaction or derived benefit that a buyer obtains from consuming an extra unit of a good or service. This variable, essential to understand the economía, is used by experts to set the exact amount of product that an individual will buy. We find two types of marginal utility: positive marginal utility (when consuming an extra item increases the total profit) and negative marginal utility (when consuming an extra item decreases total utility).
What determines marginal utility?
Broadly speaking, we can say that marginal utility tries to answer these two questions:
- How many units of goods and services must we consume to maximize our total utility?
- Regarding levels of best before date refers, how can we apply the conclusions drawn from the previous question to understand the decision-making process that a person has when purchasing goods and services?
Relationship between marginal utility and total utility
While the total utility is the utility that provides the amount consumed of the good or service, marginal utility is nothing more than the increase in total utility. What does this mean? That while the total utility increases as the consumption of units of a good or service increases, the marginal utility becomes decreasing during a determined period of time.
Practical examples of marginal utility
Taking into account that the marginal utility can be positive or negative, we are going to enunciate a series of quite representative examples of the concept.
- The more pizza we eat, the less satisfaction we get over time. In other words, the first slices of pizza will give us enormous satisfaction, but if we continue to eat them we may end up sick to our stomach. In this specific case, marginal utility would reach negative levels and total utility would gradually decrease.
- A chair that only has two legs will not be of sufficient value, since stability will be conspicuous by its absence. However, if we add a third and a fourth leg, the chair will be able to support itself and therefore the marginal utility of this product will increase.