marginal utility

Topics: Economics, Nathan's Hot Dog Eating Contest, Marginal utility Pages: 2 (636 words) Published: January 4, 2014
Marginal Utility
Suppose Mr. X is hungry and eats oranges one by one. The first orange gives him great pleasure. By the time he starts taking the second, the intensity of his desire diminishes to a certain extent, and second orange yields less satisfaction. The satisfaction derived from the third will be less than that of the second, that of the fourth less than that of the third and so on. In this way, the incremental utility will go on decreasing till it drops to zero, and if he takes more, the satisfaction may become even negative or disutility may creep in. Zero utility means the consumer is not in need of the commodity any further. For each additionally unit an individual consumes, the marginal utility is less than the previous unit. Alfred Marshall in his book ‘Principles of Economics’ gave a precise explanation of this: “The additional benefit which a person derives from a given increase of his stock of a thing diminishes with every increase in the stock that he already has.” Can marginal utility be negative? Yes. At a holiday dinner, you may overeat and suffer from indigestion afterwards to a point where you regret having eaten too much, but at the time of the dinner, you expected greater utility from eating the last of the meal. We would not willingly consume an item that gave us negative marginal utility. Then why would an individual stuff themselves during a hot dog eating contest where clearly the last hot dogs consumed are making them worse off? Although the marginal utility from the last hot dog itself makes the person worse off, the utility from winning the contest is greater making the marginal utility positive. The marginal utility of an item can change. For example, during a drought, water provides a high positive marginal utility, and with more rain the marginal utility declines. At some point, there is too much rain, it turns from being a good utility to a bad one and the marginal utility of more rain, when it is already flooding, is...
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