7.1.1—Total and marginal utility

Total utility is the satisfaction from consuming a given quantity. Marginal utility is the change in total utility from consuming one additional unit: MU = change in TU divided by change in quantity.

If marginal utility is positive, total utility rises; if it is zero, total utility is at a maximum; if it is negative, total utility falls. The law of diminishing marginal utility says successive units often add less satisfaction, holding other conditions constant.

If total utility rises from 40 to 52 when consumption increases from 2 to 3 units, marginal utility of the third unit is 12 utils.

Diminishing marginal utility does not mean total utility immediately falls, and utility is an analytical measure rather than a directly observed physical substance.