What is an example of marginal and total utility?
1 Answer
Utility measures the satisfaction of an individual for having a determined amount of a good / some goods.
The total utility is measured in terms of ordinal numbers, that is, it is only representative for knowing "the level" of a given utility. Saying it is ordinal means it is not cardinal. Saying it is not cardinal means that we can never say that my Utility is twice yours if my Utility is 20 for an amount of good X and yours is 10 for the same amount of good X. All we can say is that my total Utility is greater than yours.
Marginal Utility is the increase in Total Utility due to an increase in ONE unity of that given good.
One classic example is: glass of water.
Let's say... Your total utility for one glass of water is 10. But for two glasses it is 18. For three, it is 22. For four, it is 23. For five, it is 23.5.
We can infer that marginal utility has positive diminishing returns: it increases in each time lower quantities. And why is that? That is because the individuals become satiated when you increase the amount of the given good. Doesn't that make sense, after all? :)
