Marginal Utility

Marginal utility measures how much total satisfaction or benefit changes when consumption changes by a small amount. The formula works as a rate of change: dividing the change in utility by the change in quantity tells you the satisfaction gained from each extra unit. In economics, this is useful because the usefulness of added units is often not constant and can rise or fall depending on how much has already been consumed.

Use this when comparing the benefit of one more unit of a good, such as an extra bottle of water, slice of pizza, or hour of leisure. It is also useful in consumer choice problems where you need to decide whether an additional unit is worth the cost.

• Using total utility instead of the change in utility
• Forgetting to divide by the change in quantity
• Assuming marginal utility must stay constant for every additional unit