Marginal utility

Marginal utility is a concept in economics that measures the additional utility or satisfaction derived from consuming an additional unit of a good or service. It is the change in total utility resulting from a one-unit change in the quantity consumed or demanded.

Calculation

The formula to calculate marginal utility is the change in total utility divided by the change in quantity consumed. Therefore, the correct option is b) Change in total utility ÷ change in quantity consumed.

Explanation

Marginal utility is a crucial concept in economics as it helps to explain consumer behavior and the law of diminishing marginal utility. It is based on the principle that as a consumer consumes more units of a good or service, the additional satisfaction or utility derived from each additional unit decreases.

To calculate marginal utility, one needs to determine the change in total utility resulting from a change in the quantity consumed. This can be done by comparing the total utility of consuming one quantity to the total utility of consuming a slightly different quantity. The difference between these two total utilities represents the change in total utility.

Next, this change in total utility is divided by the change in quantity consumed to obtain the marginal utility. This provides a measure of the additional satisfaction obtained from consuming one more unit of the good or service.

For example, let's say a consumer derives a total utility of 100 from consuming 5 units of a good and a total utility of 120 from consuming 6 units. The change in total utility is 120 - 100 = 20. The change in quantity consumed is 6 - 5 = 1. Therefore, the marginal utility is 20/1 = 20, indicating that the consumer gains an additional 20 units of satisfaction from consuming one more unit of the good.

In conclusion, marginal utility is calculated by dividing the change in total utility by the change in quantity consumed. It helps to quantify the additional satisfaction obtained from consuming one more unit of a good or service and plays a crucial role in consumer decision-making.

The marginal utility can be stated by all of the above options.