Concept

Marginal utility

Summary
In economics, utility refers to the satisfaction or benefit that consumers derive from consuming a product or service. Marginal utility, on the other hand, describes the change in pleasure or satisfaction resulting from an increase or decrease in consumption of one unit of a good or service. Marginal utility can be positive, negative, or zero. For example, when eating pizza, the second piece brings more satisfaction than the first, indicating positive marginal utility. However, after the third or fourth piece, the satisfaction level starts to decrease, indicating zero or negative marginal utility. Negative marginal utility implies that every additional unit consumed causes more harm than good, leading to a decrease in overall utility. In contrast, positive marginal utility indicated that every additional unit consumed increases overall utility. In the context of cardinal utility, economists postulate a law of diminishing marginal utility. This law states that the first unit of cons
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