what is marginal utility 
marginal utility is the added satisfaction that a consumer gets from having one more unit of a good or service the concept of marginal utility is used by economists to determine how much of an item consumers are willing to purchase positive marginal utility occurs when the consumption of an additional item increases the total utility on the other hand negative marginal utility occurs when the consumption of one more unit decreases the overall utility investopedia dennis madambaunderstanding marginal utilityeconomists use the idea of marginal utility to gauge how satisfaction levels affect consumer decisions economists have also identified a concept known as the law of diminishing marginal utility it describes how the first unit of consumption of a good or service carries more utility than later units although marginal utility tends to decrease with consumption it may or may not ever reach zero depending on the good consumed marginal utility is useful in explaining how consumers make choices to get the most benefit from their limited budgets in general people will continue consuming more of a good as long as the marginal utility is greater than the marginal cost in an efficient market the price equals the marginal cost that is why people keep buying more until the marginal utility of consumption falls to the price of the good types of marginal utilitythere are multiple kinds of marginal utility three of the most common ones are as follows positive marginal utility occurs when having more of an item brings additional happiness suppose you like eating a slice of cake but a second slice would bring you some extra joy then your marginal utility from consuming cake is positive zero marginal utility is what happens when consuming more of an item brings no extra measure of satisfaction for example you might feel fairly full after two slices of cake and wouldn t really feel any better after having a third slice in this case your marginal utility from eating cake is zero negative marginal utility is where you have too much of an item so consuming more is actually harmful for instance the fourth slice of cake might even make you sick after eating three pieces of cake history of marginal utilitythe concept of marginal utility was developed by economists who were attempting to explain the economic reality of price which they believed was driven by a product s utility in the 18th century economist adam smith discussed what is known as the paradox of water and diamonds this paradox states that water has far less value than diamonds even though water is vital to human life this disparity intrigued economists and philosophers around the world in the 1870s three economists william stanley jevons carl menger and leon walras each independently came to the conclusion that marginal utility was the answer to the water and diamonds paradox in his book the theory of political economy jevons explained that economic decisions are made based on final marginal utility rather than total utility example of marginal utilitydavid has four gallons of milk then decides to purchase a fifth gallon meanwhile kevin has six gallons of milk and likewise chooses to buy an additional gallon david benefits from not having to go to the store again for a few days so his marginal utility is still positive on the other hand kevin may have purchased more milk than he can reasonably consume meaning his marginal utility might be zero the chief takeaway from this scenario is that the marginal utility of a buyer who acquires more and more of a product steadily declines eventually there is no additional consumer need for the product in many cases at that point the marginal utility of the next unit equals zero and consumption ends marginal utility vs total utilitymarginal utility measures the change in satisfaction from consuming one additional unit total utility instead measures the total amount of satisfaction of you get from all the units you consume of a good or service marginal utility affects total utility positive marginal utility causes total utility to increase while negative marginal utility decreases total utility for example if you go to five sessions with a personal trainer you might get the highest level of satisfaction from the novelty and excitement of the first session with each additional session the marginal utility decreases because you are less excited and doing more strenuous work but the marginal utility of each is positive so your total utility is still increasing 