Marginal Utility

Why might marginal utility be increasing?

- goods or services require some experience to enjoy - goods or services only deliver positive utility if you buy a sufficient quantity - this is RARE, in the relevant range of consumption, marginal utility is still diminishing

marginal utility curve

- shows how marginal utility depends on the quantity of a good or service consumed - constructed by plotting points at the midpoint between the numbered quantities since marginal utility is found as consumption levels change - slopes downward b/c each successive unit of a good or service adds less to the total utility than the previous unit

marginal utility

change in total utility generated by consuming one additional unit of that good or service

How do consumers chose how much to consume?

consider the change in total utility from consuming one more unit of that good or service

What does a negative marginal utility mean?

consuming that unit of a good or service actually reduces total utility

principle of diminishing marginal utility

each successive unit of a good or service consumed adds less to total utility than does the previous unit (additional satisfaction a consumer gets from one more unit of a good or service declines as the amount of that good or service rises)

utility

measure of personal satisfaction, a way to study choices

utility function

shows the relationship between a consumer's utility and the consumption bundle he or she consumes

shape of utility function

slopes upward over most of the range shown but gets flatter as the quantity of consumption increases (increasing at a decreasing rate)

When is enough enough?

the quantity along the x-axis when the total utility reaches its maximum point before beginning to decrease (work its way backward)

util

unit of utility (arbitrary number used to quantify satisfaction based on a range)