Marginal utility

click fraud protection

Marginal utility is the amount of surplus utility that is added to the consumption of each additional unit of the good.The concept of utility, despite its abstract nature, has long been used in economic theory, in order to determine the degree of pleasure, satisfaction, or benefits that people get from the consumption of certain goods.

marginal utility theory emerged in the second half of the 19th century as an alternative to the concept of the labor theory of value.It worked out by representatives of the Austrian School: E. Böhm-Bawerk, Menger, Schumpeter, FFWieser and A. Marshall, W. Jevons and L. Walras.

Its essence lies in the fact that the main factor affecting the value of a commodity is its marginal utility, which depends in turn on subjective evaluation of person their needs.To illustrate, consider the following example.Suppose millionaire was in the Sahara desert and at a temperature of about 40 ° was very thirsty.In the pocket of his trousers is a handful of diamonds.And then there is a Bedouin from the wineskin of water and offers to trade diamonds on the water.What's in this case the person will be of great value?It is obvious that water, because without it, he runs the risk of dying.

Take another example.Imagine that on a hot July day, you came across a kiosk with ice cream, and you decide to buy one package.Then, having eaten the first portion, we bought a second, because you want more ice cream, but not so much.After the second package is already beginning to think or not to buy a third.And if someone offers to eat the fourth or fifth, you are unlikely to agree.This example describes the law of diminishing utility, which says that as the saturation human needs usefulness of things for him is reduced.

Proponents of the theory of marginal utility believe that the consumption of any product or service to a person "incremental" nature.This means that the customer usually does not follow the principle of "all or nothing", and gradually increasing the number of consumable goods or services, as long as their need not saturate.

Thus, knowing what the marginal utility, we can draw three main conclusions:

  1. for each additional consumer goods carries an additional utility, which is called the "marginal."
  2. The more goods the buyer managed to consume, the less useful it is for each successive unit of the product.Thus, we can safely say that the marginal utility is decreasing character.And between the value of the goods and the marginal utility of an inverse relationship.Its essence is that the smaller the amount of goods (goods) a person is, the more valuable for him with this product.It turns out that value is determined by the degree of its utility, which has the last unit of the good that can satisfy the least urgent need.
  3. When consuming a certain number of units of a product (for example, ice cream), a person receives a sum of utilities, departing every time.In economic theory called the standard unit of marginal utility "Utile".If the intake of the first ice cream man gives useful in Utile 7, the second - 6, the third - 5, and the fourth - 4 Jutila, the total value of these products will be equal to 22 Jutila (and the marginal utility is 4 Jutila).Failure to each regular servings of ice cream will be a reduction in the total (total) utility and a simultaneous increase in the marginal utility of the last package.For example, if a person is refused from the fourth portion, the total utility (TU) will be equal to 18 units, and the marginal utility (MU) is 5, in case of failure of the third portion of TU will be 13 units, and MU will increase to 6, and so on. Etc..