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Marginal Utility Per Dollar Formula:
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Marginal Utility Per Dollar (MU/$) is an economic concept that measures the additional satisfaction (utility) gained from spending one more dollar on a particular good or service. It helps consumers make optimal spending decisions by comparing the utility per dollar across different products.
The calculator uses the Marginal Utility Per Dollar formula:
Where:
Explanation: This calculation helps determine how much additional utility you get for each dollar spent, allowing for better comparison between different purchasing options.
Details: Calculating marginal utility per dollar is essential for consumer optimization. It enables individuals to allocate their budget in a way that maximizes total utility by comparing the MU/$ ratios of different goods and services.
Tips: Enter the marginal utility (in utils) and the price (in USD). Both values must be positive numbers, with price greater than zero.
Q1: What is marginal utility?
A: Marginal utility is the additional satisfaction or benefit gained from consuming one more unit of a good or service.
Q2: How is MU/$ used in consumer decision making?
A: Consumers should allocate their budget to maximize total utility by purchasing goods where MU/$ is highest first, then moving to lower MU/$ items.
Q3: 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 from each additional unit decreases.
Q4: Can MU/$ be negative?
A: While marginal utility can be negative (disutility), MU/$ is typically positive since price is always positive. Negative MU would indicate dissatisfaction from consumption.
Q5: How does price affect MU/$?
A: As price increases, MU/$ decreases (assuming constant MU), making the good less attractive compared to alternatives.