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Marginal Utility Formula:
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Marginal Utility (MU) is the additional satisfaction or benefit a consumer gains from consuming one more unit of a good or service. It's a fundamental concept in microeconomics that helps explain consumer choice behavior.
The calculator uses the Marginal Utility formula:
Where:
Explanation: The formula calculates how much additional utility is gained per additional unit consumed. As quantity increases, marginal utility typically decreases (law of diminishing marginal utility).
Details: Understanding marginal utility helps businesses set prices, helps economists understand consumer behavior, and explains why demand curves slope downward. It's foundational for utility maximization theory.
Tips: Enter the change in total utility (in utils) and the change in quantity consumed (in units). The change in quantity cannot be zero. Both values can be positive or negative depending on the context.
Q1: What's the difference between total utility and marginal utility?
A: Total utility is the overall satisfaction from consuming all units, while marginal utility is the satisfaction from just the last unit consumed.
Q2: Why does marginal utility diminish?
A: As you consume more of something, each additional unit provides less additional satisfaction than the previous one (law of diminishing marginal utility).
Q3: Can marginal utility be negative?
A: Yes, when consuming more of a good actually makes you worse off (e.g., eating too much food).
Q4: How is this used in real-world applications?
A: Businesses use it for pricing strategies, governments for tax policies, and individuals for making consumption choices.
Q5: What are utils?
A: Utils are hypothetical units of measurement for utility/satisfaction. While subjective, they allow for quantitative analysis of consumer preferences.