What does marginal utility refer to?

Marginal utility refers specifically to the additional satisfaction or benefit that a consumer derives from consuming one more unit of a good or service. This concept is central to understanding consumer choice and behavior in economics. As individuals decide how much of a good to consume, they consider the incremental benefit they receive from consuming slightly more of it.

This additional satisfaction can help explain why demand curves typically slope downwards; as consumers consume more of a good, the marginal utility of each additional unit decreases. However, when considering just one more unit, the focus remains on the benefit that unit delivers. This understanding is crucial for analyzing consumer preferences and making decisions about resource allocation.

Understanding marginal utility also differentiates it from total utility, which is the overall satisfaction obtained from all units consumed, and from average utility, which measures satisfaction per unit consumed.