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In economics, marginal utility describes the change in utility (pleasure or satisfaction resulting from the consumption) of one unit of a good or service. [1] Marginal utility can be positive, negative, or zero. Negative marginal utility implies that every additional unit consumed of a commodity causes more harm than good, leading to a decrease ...
The theory of marginal utility, which is based on the subjective theory of value, says that the price at which an object trades in the market is determined neither by how much labor was exerted in its production nor on how useful it is on the whole. Rather, its price is determined by its marginal utility. The marginal utility of a good is ...
v. t. e. Marginalism is a theory of economics that attempts to explain the discrepancy in the value of goods and services by reference to their secondary, or marginal, utility. It states that the reason why the price of diamonds is higher than that of water, for example, owes to the greater additional satisfaction of the diamonds over the water.
Marginal utility usually decreases with consumption of the good, the idea of "diminishing marginal utility". In calculus notation, the marginal utility of good X is =. When a good's marginal utility is positive, additional consumption of it increases utility; if zero, the consumer is satiated and indifferent about consuming more; if negative ...
Indifference curve. In economics, an indifference curve connects points on a graph representing different quantities of two goods, points between which a consumer is indifferent. That is, any combinations of two products indicated by the curve will provide the consumer with equal levels of utility, and the consumer has no preference for one ...
Gossen's laws, named for Hermann Heinrich Gossen (1810–1858), are three laws of economics: Gossen's First Law is the "law" of diminishing marginal utility: that marginal utilities are diminishing across the ranges relevant to decision-making. Gossen's Second Law, which presumes that utility is at least weakly quantified, is that in ...
The marginal utility of a good or service is the utility of the specific use to which an agent would put a given increase in that good or service, or of the specific use that would be abandoned in response to a given decrease. In other words, marginal utility is the utility of the marginal use.
Cardinal utility. In economics, a cardinal utility function or scale is a utility index that preserves preference orderings uniquely up to positive affine transformations. [1] [2] Two utility indices are related by an affine transformation if for the value of one index u, occurring at any quantity of the goods bundle being evaluated, the ...