Calculating Marginal Utility

Oct 13, 2025 by magicalceylontours.com 38 views

**Calculating Marginal Utility: A Guide to Understanding Consumer Behavior**

What is Marginal Utility?

Marginal utility is a concept in economics that refers to the additional satisfaction or benefit that a consumer derives from consuming one more unit of a good or service. It is a measure of the change in total utility that occurs when a consumer increases their consumption of a good or service by one unit.

Calculating Marginal Utility

To calculate marginal utility, we need to use the following formula:

Marginal Utility (MU) = Change in Total Utility (TU) / Change in Quantity (Q)

Example: John's Hershey's Kisses

Let's use the chart below to calculate the marginal utility of Hershey's Kisses for John.

Quantity (Q)	Total Utility (TU)
1	10
2	20
3	30
4	40
5	50

Step 1: Calculate the Change in Total Utility

To calculate the marginal utility, we need to find the change in total utility that occurs when John increases his consumption of Hershey's Kisses by one unit.

Quantity (Q)	Total Utility (TU)	Change in TU
1	10	-
2	20	10
3	30	10
4	40	10
5	50	10

Step 2: Calculate the Change in Quantity

The change in quantity is simply the difference between the current quantity and the previous quantity.

Quantity (Q)	Change in Q
1	-
2	1
3	1
4	1
5	1

Step 3: Calculate the Marginal Utility

Now that we have the change in total utility and the change in quantity, we can calculate the marginal utility using the formula:

Marginal Utility (MU) = Change in Total Utility (TU) / Change in Quantity (Q)

Quantity (Q)	Total Utility (TU)	Change in TU	Change in Q	Marginal Utility (MU)
1	10	-	-	-
2	20	10	1	10
3	30	10	1	10
4	40	10	1	10
5	50	10	1	10

Graphing Total and Marginal Utility

The graph below shows the total utility and marginal utility of Hershey's Kisses for John.

Total Utility

Quantity (Q)	Total Utility (TU)
1	10
2	20
3	30
4	40
5	50

Marginal Utility

Quantity (Q)	Marginal Utility (MU)
1	-
2	10
3	10
4	10
5	10

Q&A

Q: What is the difference between total utility and marginal utility?

A: Total utility is the overall satisfaction or benefit that a consumer derives from consuming a good or service, while marginal utility is the additional satisfaction or benefit that a consumer derives from consuming one more unit of a good or service.

Q: How do you calculate marginal utility?

A: To calculate marginal utility, you need to use the formula: Marginal Utility (MU) = Change in Total Utility (TU) / Change in Quantity (Q).

Q: What is the relationship between total utility and marginal utility?

A: The total utility is the sum of the marginal utilities of each unit of a good or service.

Q: Why is marginal utility important in economics?

A: Marginal utility is important in economics because it helps consumers make informed decisions about how much of a good or service to consume. It also helps businesses understand how to price their products and services.

Q: Can marginal utility be negative?

A: Yes, marginal utility can be negative. For example, if a consumer is already consuming a large quantity of a good or service and consuming one more unit would make them feel sick or uncomfortable, the marginal utility would be negative.

Q: How does marginal utility relate to the law of diminishing marginal utility?

A: The law of diminishing marginal utility states that as a consumer consumes more and more of a good or service, the marginal utility of each additional unit decreases. This is because the consumer is already getting a lot of satisfaction from the good or service, and each additional unit provides less and less satisfaction.