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What is Marginal Utility?
Marginal utility is defined as the increase in utility as a result of consuming one more unit of the good. In other -- algebraic -- terms,
MU = ^U/^Q dU/dQ
where U is utility and Q is the quantity of the good. In the numerical example, the MU of water is 1 and the MU of diamonds is 15, so the consumer is willing to pay 15 times as much for a diamond as for a gallon of water. (This example is, of course, not "realistic.") Despite that, the person gets about 67000 times as much total utility from water as from a diamond.
Economists call the part of utility that is gained or lost (in the decision to buy one more unit) the marginal utility.
Marginal utility is defined as the increase in utility as a result of consuming one more unit of the good. In other -- algebraic -- terms,
MU = ^U/^Q dU/dQ
where U is utility and Q is the quantity of the good. In the numerical example, the MU of water is 1 and the MU of diamonds is 15, so the consumer is willing to pay 15 times as much for a diamond as for a gallon of water. (This example is, of course, not "realistic.") Despite that, the person gets about 67000 times as much total utility from water as from a diamond.
Economists call the part of utility that is gained or lost (in the decision to buy one more unit) the marginal utility.