Principles of Macroeconomics / Unit 1 MAC 0019 short lesson, about 20 seconds
Marginal Analysis and Diminishing Utility
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The idea
Marginal analysis compares the benefit and cost of a little more or a little less, rather than all or nothing. Utility is the satisfaction a good gives.
In practice
Nobody decides whether to use water, but whether to take a shorter shower.
Where people slip
That is the law of diminishing marginal utility: a buyer keeps buying only while the next unit is worth its cost.
Your place on the trail
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- Nothing yet depends on this.
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