Answered: How to compute Marginal Utility.

Microeconomics

13th Edition

ISBN:9781337617406

Author:Roger A. Arnold

Publisher:Roger A. Arnold

Chapter7: Consumer Choice: Maximizing Utility And Behavioral Economics

Section7.1: Utility Theory

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How to compute Marginal Utility.

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Utility refers to the total amount of satisfaction derived from the consumption of a good or service. This definition is derived from the concept of usefulness. The understanding of utility is important to maximize the utility derived from the consumption of a good, a rational consumer will always aim at getting the maximum utility. There are two concepts of utility:

1. Cardinal utility analysis holds that utility derived from the good can be measured in economic units named utils.

2. Ordinal utility analysis holds that utility cannot be measured but consumers can choose the goods on the basis of preference.

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