Principles of Microeconomics / Unit 5 MIC 0403 worked example, 60 to 90 seconds
Computing Marginal Utility from a Table
The idea
Given total utility at each quantity, marginal utility is the difference between consecutive rows: total at this quantity minus total at the one before. List the differences beside the rows, then check the law: the differences should fall as quantity rises. Going the other way, total utility at any quantity is the sum of all the marginal utilities up to it, so the two columns can always be rebuilt from each other.
In practice
Worked example: a student's total utility from coffees in a day runs zero, twenty, thirty-five, forty-five, fifty, fifty-two. The marginal utilities are twenty, fifteen, ten, five and two: each cup adds less than the one before, so the law holds. Adding the first three marginals, twenty plus fifteen plus ten, returns forty-five, the total at three cups.
Where people slip
Marginal utility belongs between two rows, not on one of them, so the error is to read the total at a quantity as its marginal. The second slip is to stop when marginal utility turns small; it need only stay positive for total utility to rise, and the budget, not the table, decides where to stop.
Your place on the trail
Every lesson rests on earlier ones and opens later ones. Tap any to jump.
Builds on
Unlocks
- Nothing yet depends on this.
Something wrong in this lesson? Flag it