Total and marginal utility
Total utility is overall satisfaction from consumption; marginal utility is the increase in total utility from one more unit.
| Bowls of noodles | Total utility | Marginal utility |
|---|---|---|
| 1 | 10 | 10 |
| 2 | 16 | 6 |
| 3 | 19 | 3 |
| 4 | 19 | 0 |
| 5 | 17 | −2 |
Total utility peaks where marginal utility reaches zero and then declines (illustrative figures).
History
Hermann Heinrich Gossen (1854) first stated it systematically; in the 1870s Jevons, Menger and Walras independently built marginal utility theory in the "marginal revolution".
Implications
- Demand curve: since extra units are worth less, people buy more only at lower prices, so demand slopes downward.
- Diamond-water paradox: water has huge total utility but low marginal utility because it is plentiful; scarce diamonds have high marginal utility and price.
- Redistribution argument: if the marginal utility of income diminishes, a dollar means more to a poor person than to a rich one (interpersonal comparison remains contested).
- Utility maximization: equalize marginal utility per unit of money across goods (Gossen's second law).
Limits and exceptions
Collectibles, addictive goods or acquired tastes can show rising marginal utility at first. Modern economics expresses the idea through indifference curves and a diminishing marginal rate of substitution rather than measurable utility.
References
- Gossen, H. H. (1854/1983). The Laws of Human Relations and the Rules of Human Action Derived Therefrom (R. C. Blitz, Trans.). MIT Press.
- Jevons, W. S. (1871). The Theory of Political Economy. Macmillan.
- Menger, C. (1871). Grundsätze der Volkswirthschaftslehre. Braumüller.
- Mankiw, N. G. (2021). Principles of Economics (9th ed.). Cengage.
- Stigler, G. J. (1950). The development of utility theory. Journal of Political Economy, 58(4), 307-327.