Total Utility: The amount of satisfaction gained from consuming something.
Marginal Utility: The amount of satisfaction gained from consuming one more unit of something. After it reaches zero, it starts to negatively affect total utility,
Diminishing Marginal Utility: The usefulness (or utility) of a good or service declines as one has more of it. For example: if one has a single pair of khaki slacks, the pair will be worn every day. If one has eight pairs of khaki slacks, then each pair is slightly less useful, but still serve a purpose: there is a pair for every day, and an extra just in case. However, if one has forty pairs of identical khaki slacks, then they are likely not only not useful, but actually a nuisance. Where would one store such a large number of pants? …show more content…
Consumers only want to buy as much of a product as is useful to them, and producers only want to produce as much as product as consumers will buy. If Corinne decided to buy 20 pairs of galoshes, she would not have space in her dorm to store them, and her friends would think she was weird. However, if she bought 4 pairs of galoshes, she could make a joke about how much she loves galoshes, and her friends would laugh and think she was charmingly unique.
If galoshes were on sale, if they were popular, or if they came with free socks, Corinne might want to buy more. If galoshes were unpopular, expensive, or Corinne did not have enough money, she might not want to buy them. Corinne is my sister, and she insists on wearing rain boots everywhere. If I had the money, I would buy her waterproof leather boots (a substitute), because her polka dot galoshes are not attractive; instead, I had to make due with buying her insoles (a
Marginal Utility: The amount of satisfaction gained from consuming one more unit of something. After it reaches zero, it starts to negatively affect total utility,
Diminishing Marginal Utility: The usefulness (or utility) of a good or service declines as one has more of it. For example: if one has a single pair of khaki slacks, the pair will be worn every day. If one has eight pairs of khaki slacks, then each pair is slightly less useful, but still serve a purpose: there is a pair for every day, and an extra just in case. However, if one has forty pairs of identical khaki slacks, then they are likely not only not useful, but actually a nuisance. Where would one store such a large number of pants? …show more content…
Consumers only want to buy as much of a product as is useful to them, and producers only want to produce as much as product as consumers will buy. If Corinne decided to buy 20 pairs of galoshes, she would not have space in her dorm to store them, and her friends would think she was weird. However, if she bought 4 pairs of galoshes, she could make a joke about how much she loves galoshes, and her friends would laugh and think she was charmingly unique.
If galoshes were on sale, if they were popular, or if they came with free socks, Corinne might want to buy more. If galoshes were unpopular, expensive, or Corinne did not have enough money, she might not want to buy them. Corinne is my sister, and she insists on wearing rain boots everywhere. If I had the money, I would buy her waterproof leather boots (a substitute), because her polka dot galoshes are not attractive; instead, I had to make due with buying her insoles (a