Marginal utility is the additional satisfaction derived from the consumption of an extra unit of a
commodity. It is measured by the derivative of the total utility function, that is, change in total utility
per unit change in the quantity (of a commodity) consumed:
MU = dTU/dQ where
MU: Marginal utility
TU: Total utility
Q: Quantity consumed.
This additional satisfaction (marginal utility) decreases as successive units of a commodity are consumed –
thus diminishing marginal utility.
Marginal utility falls under the cardinalist approach of consumer behavior which assumes that consumer
satisfaction (utility) is measurable in terms of money the consumer is willing and able to pay for a commodity.
Marginal utility varies from one individual to another e.g. a person in North Eastern province of Kenya will
find a glass of cold juice very satisfying relative to a person in a cold area like Limuru or Kericho.
Diminishing marginal utility is based on the following assumptions:
1. Utility is measurable
2. Constant marginal utility of money
3. Normality of goods and rationality of the consumer
4. Successive units are homogeneous
5. Continuity in consumption of the successive units.
Wilfykil answered the question on February 6, 2019 at 06:32
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