Calculating Marginal Utility. Marginal Utility Is the extra satisfaction generated from consuming one more unit of a good Is the extra satisfaction generated.

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Presentation transcript:

Calculating Marginal Utility

Marginal Utility Is the extra satisfaction generated from consuming one more unit of a good Is the extra satisfaction generated from consuming one more unit of a good It is the analysis of market demand, the law of demand, and consumer demand theory It is the analysis of market demand, the law of demand, and consumer demand theory Marginal utility is a key factor underlying the demand price that buyers are willing and able to pay for a given quantity of a good. Marginal utility is a key factor underlying the demand price that buyers are willing and able to pay for a given quantity of a good.

Marginal Utility Contrasted with total utility Contrasted with total utility Marginal utility is the additional satisfaction obtained from consuming one additional unit of a good Marginal utility is the additional satisfaction obtained from consuming one additional unit of a good Total utility is the overall amount of satisfaction obtained from consuming several units of a good Total utility is the overall amount of satisfaction obtained from consuming several units of a good

Calculating Marginal Utility

The marginal utility of the 3rd bottle of water = 36 units – 27 units = 9 units.

Marginal Utility Formula Marginal Utility = C Change in total utility Change in quantity