Marginal utility
Also called: diminishing marginal utility
Marginal utility is the extra satisfaction from one more unit of something. It usually falls with each unit, which is called diminishing marginal utility.
The first slice of pizza is worth more to you than the fifth. Diminishing marginal utility explains why demand curves slope down and why a dollar matters more to a poor person than a rich one.
Related terms
- Marginal cost: Marginal cost is the cost of producing one more unit.
- Price elasticity of demand: Price elasticity of demand measures how much the quantity people buy changes when the price changes.
- Consumer surplus: Consumer surplus is the difference between what buyers would be willing to pay and what they actually pay.
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