Tuesday, July 25th 2017

Marginal Utility

Marginal Utility Meaning:
Refers to the change in utility (that is, satisfaction) that comes with an increase or decrease in the amount available of that good or service.

Marginal Utility Example:
Because people can be expected to satisfy their most pressing needs first, marginal utility normally declines with increasing availability of a good or service. A simple example is money. If someone has no money then $100 has a marginal utility of $100 to them, as they can be expected to spend it on the basic necessities of life. If someone already has $100,000, then $100 has very little marginal utility to them, perhaps far less than $100.

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