What is the importance of marginal utility in micro economics?

Answer 1

Marginal utility is an economic concept that determines how much of an item a consumer will buy. Positive marginal utility happens when the consumption of the additional item increases. On the other hand, negative marginal utility occurs when the consumption of additional item decreases.

Answer 2

Marginal utility of a commodity helps to find its "Economic Value". Lets take the example of water of and diamond. Diamond is of more economic value than water although the use of water is worth. Here in this case the economic value of diamind is found by the marginal utility. Due to its scarcity the marginal utility of the 2nd diamond bought is much more higher than the 5th or 6th glass of water,which is easily available. This phenomenon is also called "The Paradox of Value" presented by the Adam Smith.

Answer 3

Think of it this way: if you are penniless and homeless, and you find a ten-dollar bill while walking down the street, those $10 are extremely valuable to you. That $10 bill means that you will be able to buy a meal and fend off starvation for another day.

On the other hand, if you are Bill Gates, and you find a $10 bill on the street, those $10 have relatively little value to you.

Marginal utility refers to the value that you derive from acquiring an additional unit of a resource. The Law of Diminishing Marginal Utility states that each unit of a resource you acquire will be slightly less valuable than the unit before it. This is the rationale behind the progressive tax system that many nations (including the U.S.) employ. The rich are taxed at higher rates, because those additional dollars are marginally less valuable to them.

Answer 4

The life of a tangible asset after it has been fully depreciated. You may be able to depreciate the total cost of an assset in ten years, but the asset ( such as a vehicle) actually lasts for 15 years. The last 5 years are " marginal utility"

Answer 5

The utility gained from one additional unit of consumption.

Answer 6

The concept of marginal utility involves