What is Marginal utility
Marginal utility is an economic term that indicates the variation of the total utility in changing consumption of good (product, service) by the unit.

Marginal utility is an economic term that indicates the variation of the total utility in changing consumption of good (product, service) by the unit. With the growth of the quantity of goods consumed, marginal utility tends to decrease (law of diminishing marginal utility).

Marginal utility can be mathematically expressed as:

MU = ΔTU / ΔQ

Where:

• MU - Marginal Utility
• ΔTU - Change in Total Utility
• ΔQ - Change in Quantity consumed

Mathematically, it is a slope of the curve of total utility.

Use of the marginal utility in practice: A consumer optimizes consumption of good or service up to the level where the marginal utility equals the price of the good (MU=P). Marginal utility makes it possible to determine the optimum of the consumption of the good by the specific consumer.

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Last update: 07.09.2015