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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 calculator uses the Marginal Utility formula:
Where:
Explanation: The formula calculates the rate of change in total utility with respect to the change in quantity consumed.
Details: Understanding marginal utility is essential for analyzing consumer equilibrium, demand curves, and the law of diminishing marginal utility, which states that as consumption increases, the marginal utility derived from each additional unit declines.
Tips: Enter the change in total utility (ΔTU) in utils and the change in quantity (ΔQ) in units. The change in quantity must be greater than zero.
Q1: What is the difference between total utility and marginal utility?
A: Total utility is the overall satisfaction from consuming a certain quantity of goods, while marginal utility is the additional satisfaction from consuming one more unit.
Q2: What is the law of diminishing marginal utility?
A: This economic law states that as a person consumes more units of a good, the additional satisfaction (marginal utility) from each additional unit decreases.
Q3: Can marginal utility be negative?
A: Yes, marginal utility can become negative when consumption of an additional unit actually decreases total satisfaction (disutility).
Q4: How is marginal utility used in consumer choice theory?
A: Consumers maximize utility when the marginal utility per dollar spent is equal across all goods purchased (equimarginal principle).
Q5: What are the limitations of marginal utility theory?
A: The theory assumes utility can be measured cardinally, that consumers are rational, and doesn't account for external factors that might influence satisfaction.