Marginal Utility

Question 1

Marginal principle

Answer 1

Economic agents make decisions considering effects of small changes on existing situations

Question 2

Marginal utility

Answer 2

Additional utility that is gained from consuming the next unit of a good or service

Question 3

Law of diminishing marginal utility

Answer 3

As number of units consumed increases, utility derived from each additional unit of consumption decreases

Question 4

Marginal Utility Curve

Answer 4

• same as the demand curve
• as the utility derived decreases, consumers are less willing to pay a higher price and so demand decreases

Question 5

Equi-marginal principle

Answer 5

(Marginal utility of good X) / (Marginal utility of good Y) = (Price of X) / (price of Y)