Marginal Utility

In economics, the marginal utility of a good or service is the gain (or loss) from an increase (or decrease) in the consumption of that good or service. Economists sometimes speak of a law of diminishing marginal utility, meaning that the first unit of consumption of a good or service yields more utility than the second and subsequent units. The marginal decision rule states that a good or service should be consumed at a quantity at which the marginal utility is equal to the marginal cost.

The concept of marginal utility played a crucial role in the marginal revolution of the late 19th century, and led to the replacement of the labor theory of value by neoclassical value theory in which the relative prices of goods and services are simultaneously determined by marginal rates of substitution in consumption and marginal rates of transformation in production, which are equal in economic equilibrium.

Read more about Marginal UtilityMarginality, Utility, Diminishing Marginal Utility, Marginalist Theory, Quantified Marginal Utility, History

Other articles related to "marginal, marginal utility, utility":

Marginalism - History - The Marginal Revolution - The Second Generation
... Although the Marginal Revolution flowed from the work of Jevons, Menger, and Walras, their work might have failed to enter the mainstream were it not for a second generation of economists ... a theory of interest and of profit in equilibrium based upon the interaction of diminishing marginal utility with diminishing marginal productivity of time and with time preference ... Fisher.) Marshall was the second-generation marginalist whose work on marginal utility came most to inform the mainstream of neoclassical economics, especially by way of his Principles of Economics, the ...
Marginal Utility - History - Revival
... introduced the notion of diminishing marginal utility, it had been to address a paradox of gambling, rather than the paradox of value ... The expected utility hypothesis of Bernoulli et alii was revived by various 20th century thinkers, with early contributions by Ramsey (1926), v ... Although this hypothesis remains controversial, it not only brings utility, but a quantified conception of utility, back into the mainstream of economic ...
Marginalism - History - Revival
... When Cramer and Bernoulli introduced the notion of diminishing marginal utility, it had been to address a paradox of gambling, rather than the paradox of value ... The expected utility hypothesis of Bernoulli et alii was revived by various 20th century thinkers, perhaps most notably Ramsey (1926), v ... Although this hypothesis remains controversial, it brings not merely utility but a quantified conception thereof back into the mainstream of economic thought, and would dispatch the Ockhamistic ...
Marginal Use
... As defined by the Austrian School of economics the marginal use of a good or service is the specific use to which an agent would put a given increase, or the specific use of the good or service that would be ... The usefulness of the marginal use thus corresponds to the marginal utility of the good or service ... And, in the absence of a complementarity across uses, the “law” of diminishing marginal utility will obtain ...
Paradox Of Value - Marginalism
... The theory of marginal utility, which is based on the subjective theory of value, says that the price at which an object trades in the market is determined neither by how much labor was exerted in ... Rather, its price is determined by its marginal utility ... The marginal utility of a good is derived from its most important use to a person ...

Famous quotes containing the words utility and/or marginal:

    Moral sensibilities are nowadays at such cross-purposes that to one man a morality is proved by its utility, while to another its utility refutes it.
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    If the individual, or heretic, gets hold of some essential truth, or sees some error in the system being practised, he commits so many marginal errors himself that he is worn out before he can establish his point.
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