What does marginal utility refer to?

Marginal utility is defined as the additional satisfaction or benefit that a consumer derives from the consumption of one more unit of a good or service. This concept is central to the theory of consumer choice in economics, as it helps explain how consumers make decisions about resource allocation. When a consumer considers whether to purchase more of a good, they evaluate the extra satisfaction they would receive from consuming an additional unit.

This measure of additional satisfaction can influence how much of a good a consumer purchases, as they will continue to consume additional units as long as the marginal utility outweighs the price they have to pay for that unit. Therefore, identifying marginal utility is key in understanding consumer behavior and demand dynamics in the market.

The other concepts presented in the options relate to different facets of utility but do not capture the specific idea of marginal utility. Total satisfaction refers to the cumulative satisfaction from all units consumed rather than the satisfaction from an additional unit. Average satisfaction considers all units consumed and divides that total by the number of units, which again does not focus on the impact of consuming one extra unit. The decrease in utility with increased consumption may hint at the law of diminishing marginal utility but does not define marginal utility itself.