Marginal Utility

Marginal Utility

Change in the utility after consuming the additional unit of a product or services is known as marginal utility. Utility can be measurable and can not be measurable depends upon the way we measure the utility(satisfaction level of customer after consuming the product or service). The utility of customer can be reflected in the willingness to pay more for the product or service consumed.

Example

1. A customer purchases a chocolate and after eating chocolate that consumer is satisfied with the taste and price. In this situation, the utility is more but marginal utility can be calculated when that person buys the chocolate again, and after consuming an additional unit his/her satisfaction level increases with a desire to buy again. If that customer enjoyed additional unit consumption then there is positive marginal utility. If the customer’s willingness to consume or buy reduces with consuming additional units then there is negative marginal utility. In all the examples there can be positive as well as negative marginal utility after a specific level of consumption.

• A  customer or person who watches a movie in the theater and enjoys it a lot after watching a movie. In this situation, the person has high utility as his/her satisfaction level is high. When that customer watches the movie again in that theater and again he/she is satisfied then we can say the marginal utility is positive. If his/her enjoyment is reduced in second time then it can be derived that the marginal utility is negative.

• There may be a situation where some other factors are influencing increase or decreasing the marginal utility. When a customer is hungry and is willing to buy the food product. In this situation what option are easily available and what food product can satisfy the consumers need Bristol? This is a situation where the customers hungriness is the factor of influencing the marginal utility.

When customer is hungry he gets satisfied easily by consuming any food products. after not give as much satisfaction as the earlier gives. In this situation it is very difficult to find out the demand of that product is more or less. But the marginal utility can be determined by identifying how many units of products gives maximum level of satisfaction to the customer.

The law of diminishing the marginal utility says that it can be reduced after a specific level of consumption. Customer at the beginning feels satisfied after consuming the product or service. However additional consumption may or may not satisfy that customer. The characteristic that shows customer dissatisfaction after consuming additional units of product or services is known as the law of diminishing the marginal utility.

The change in marginal utility can be expressed in positive marginal utility, zero marginal utility, and negative marginal utility

Positive marginal utility:

When consumers are satisfied by consuming an additional unit of product or service, it indicates there is a positive marginal utility. In this situation, consumers may willing to pay more for the product or services consumed.

In India in the above example of chocolate and movies, we come to know that the customer is consuming the product or service and beginning to get satisfied more than in the second time may or may not be. If customers are satisfied and willing to pay more after consuming the product or service a second time indicates the utilities more and that utility is known as positive marginal utility.

Zero marginal utility

After consuming a specific quantity of the product or service the customer is not interested in consuming more product or service after consuming more product or service. This situation causes a Decrease in satisfaction. In this situation when customers stop willing to buy more products or services the utility is zero. This utility is known as the zero marginal utility.

From the stage of zero marginal utility, the customer is no longer interested in buying the product or services. This situation may be different for different products. The law of diminishing the margin neutrality indicates the same situation of diminishing the marginal utility after consuming the additional unit of product or service.

Negative marginal utility

When the consumer is satisfied less by consuming an additional unit product or service, it indicates there is a negative marginal utility or diminishing marginal utility. Here consumers may desire to pay less for the product or services consumed.

Negative marginal utility indicates the law of diminishing the marginal utility. A law of diminishing the marginal utility describes the additional limits consumption of products or services that tend to reduce the desire or willingness to pay to buy that product or service. It can be used to decide the level of demand for a specific product and road services for a specific.

In the example mentioned above when the person eats the chocolate the first time gives more satisfaction and enjoys When the customer eats the same chocolate a second time, the situation may change. When in the case of the persons with a habit of eating the chocolate and interest towards eating the chocolate is more then the marginal utility may be positive after eating a specific quantity of the chocolate. Even after eating a specific quantity of chocolate, the consumer may not be interested in eating or buying more units of chocolate. This situation indicates 0 marginal utility. After consuming consumption additional units of chocolate the customer becomes dissatisfied which indicates the negative margin utility.

Example

When a person or customer is hungry he or she is very much interested in buying any food products that can fulfill his or her need. Consider that a person purchased pizza when in Hungry. In this situation, that person is satisfied more by consuming or eating the pizza when he or she is very hungry. After consuming the required quantity of food the customer gets satisfied and he or she is not hungry now.

After the above situation when a customer buys or eats one more unit of pizza causes dissatisfaction or relatives say the utility as it has fulfilled the need. Here the level of need or demand may be the potential factor in increasing the utility of the customer. If demand all the need is more the utility can be more.