Marginal Utility : Definition and Classification

Definition of Marginal Utility

Marginal Utility is the utility which is derived from the consumption of an additional unit of a commodity. In other words, it is the addition to total utility, resulting from adding one unit to the consumption of a commodity.

Example : Ram consumes 6 ice creams at a time. In this case, 6 ice creams will be the marginal unit and utility derived by him from adding one unit to the consumption of a commodity.

According to modern economist Prof. Bhatia,

Marginal Utility may also be defined as the addition made to total utility by the increment of the last unit consumed.

Meaning of Utility

Utility means the power that satisfies any want. It is such an internal quality which is found in all commodities desired by a person. The quality (power or capability) of commodity which satisfies the human want; directly or indirectly is called Utility. Those commodities, which have wants satisfying power are called ‘Useful Commodities’.

Types of Marginal Utility

The intensity of want of a commodity decreases due to continuous consumption of its successive units at the same time and a situation also comes, when more units of that commodity are consumed, worthlessness is derived at the place of utility.

  1. Positive Marginal Utility

    Until we get maximum satisfaction by the consumption of a commodity, we feel the want of that commodity again and again. We get some satisfaction by the use of every unit.

  2. Zero Marginal Utility

    When we do not get satisfaction from the consumption of next unit of a commodity and there is also no loss if we do not consume that commodity; at that time, the utility of that commodity will be zero for us.

  3. Negative Marginal Utility

    When disutility occurs from consumption of a commodity, it is called Negative Marginal Utility.

Clarification of Different types of Marginal Utility

Units of Bread Marginal Utility Type of Utility
1 50 Positive
2 40
3 30
4 20
5 10
6 0 Zero
7 -10 Negative
8 -20

In the above table when a person consumes first unit of bread; he get utility equal to 50 cents. If, he continues the consumption of bread, he get the utility 40 from second unit and 30 from third unit, 20 from fourth unit and 10 from fifth unit and zero from sixth unit. Thus, it is clear that as he increases the number of units of bread; he gets utility at decreasing rate from each next unit. This process of positive utility continues till the consumption of fifth unit of bread, at this point, it becomes 10. Up to this level, the utility is Positive. He gets zero utility from consuming sixth unit of bread and this is the maximum limit of satisfaction.

If even after this limit, he continues the consumption of bread, he will get negative utility from seventh and eighth unit of bread. He will get dissatisfaction at the place of satisfaction.

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