Marginal utility
Also called: MU · Topic: Consumer Behaviour, Demand and Elasticity · NCERT: Class 12, Ch 2 "Theory of Consumer Behaviour"
Meaning
Marginal utility (MU) is the change in total utility from consuming one more unit of a good. MUₙ = TUₙ − TUₙ₋₁ According to the law of diminishing marginal utility, MU falls as more units are consumed. When MU reaches zero, total utility is at its maximum. After that, MU becomes negative and total utility falls. Falling MU explains why a consumer buys more of a good only at a lower price, which is why the demand curve slopes down.
Example
If 4 bananas give a total utility of 28 and 5 bananas give 30, then MU₅ = 30 − 28 = 2. In the Class 12 table, MU falls from 12 to 6, 4, 2 and 0, and then to −2 for the 6th unit.
Don't confuse with
- Total utility: TU is the sum of all MUs. TU is highest when MU is zero, not when MU is highest.
Related concepts
- Cardinal utility analysis
- Total utility
- Law of diminishing marginal utility
- Law of equi-marginal utility
- Consumer surplus
- Diamond-water paradox