Thursday, February 12, 2015

What is the difference between marginal utility and diminishing marginal utility?

Diminishing marginal utility is simply one "kind" of
marginal utility.  Marginal utility can be increasing, decreasing, or
stable.


Marginal utility is simply the added benefit that a
consumer gets from consuming the next unit of some good or service.  In other words, if
I have bought and eaten two sandwiches and I buy and eat another, the extra benefit I
get from the third sandwich is my marginal utility from consuming the third
sandwich.


Diminishing marginal utility comes if I get less
marginal utility from consuming the next unit than I got from consuming the previous
one.  Using the sandwich example, if I got more marginal utility from the second
sandwich than I do from the third (maybe I'm getting too full and didn't really want the
whole third sandwich), my marginal utility is
declining.


So, there is not really a difference between
these two.  It is just that diminishing marginal utility is one "kind" of marginal
utility.

No comments:

Post a Comment

What is the meaning of the 4th stanza of Eliot's Preludes, especially the lines "I am moved by fancies...Infinitely suffering thing".

A century old this year, T.S. Eliot's Preludes raises the curtain on his great modernist masterpieces, The Love...