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Marginal Utility Formula:
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Marginal Utility (MU) is the additional satisfaction or benefit that a consumer derives from consuming one more unit of a good or service. It is a fundamental concept in microeconomics that helps explain consumer choice behavior.
The marginal utility formula is:
Where:
Explanation: The formula calculates the rate of change in total utility with respect to the change in quantity consumed. It represents the additional utility gained from consuming one more unit of a good.
Details: Understanding marginal utility is crucial for analyzing consumer behavior, determining optimal consumption patterns, and explaining the law of diminishing marginal utility. It helps businesses set prices and economists understand market demand.
Tips: Enter the change in total utility and the change in quantity consumed. The change in quantity must be greater than zero. The calculator will compute the marginal utility.
Q1: What is the law of diminishing marginal utility?
A: This economic principle states that as a person consumes more units of a good, the additional satisfaction (marginal utility) from each additional unit decreases.
Q2: Can marginal utility be negative?
A: Yes, marginal utility can become negative when consumption of additional units actually decreases total satisfaction (disutility).
Q3: How is marginal utility used in pricing?
A: Businesses use marginal utility concepts to set prices where marginal utility equals marginal cost, maximizing consumer satisfaction and firm profit.
Q4: What's the difference between total utility and marginal utility?
A: Total utility is the overall satisfaction from consuming all units, while marginal utility is the additional satisfaction from consuming one more unit.
Q5: How does marginal utility relate to demand curves?
A: The downward slope of demand curves can be explained by diminishing marginal utility - as price decreases, consumers are willing to buy more units whose marginal utility is lower.