Marginal utility: Difference between revisions
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People make decisions on the '''margin'''. No one chooses between "guns" or "butter", but between a definite amount of guns and a definite amount of butter. | People make decisions on the '''margin'''. No one chooses between "guns" or "butter", but between a definite amount of guns and a definite amount of butter. | ||
As an actor acquires more and more units of a good, he devotes them to successively less and less urgent ends (i.e. ends that are lower on his scale of values). | As an actor acquires more and more units of a good, he devotes them to successively less and less urgent ends (i.e. ends that are lower on his scale of values). Therefore the marginal utility of a good declines as its supply increases. This is the '''law of diminishing marginal utility'''.<ref name="Murphy_marginal">Robert P. Murphy. [http://mises.org/rothbard/mes/guidechap1.asp "A Study Guide to Murray Rothbard's Man, Economy, and State, with Power and Market"], Chapter 1, referenced 2009-07-07.</ref> | ||
==References== | ==References== | ||
{{Reflist}} | {{Reflist}} | ||
== | ==See also== | ||
===Bibliography=== | |||
* {{Cite journal | |||
|last=Böhm-Bawerk|first=Eugen von|authorlink=Eugen von Böhm-Bawerk | |||
|title=Value, Cost, and Marginal Utility | |||
|journal=[[Quarterly Journal of Austrian Economics|The Quarterly Journal of Austrian Economics]] | |||
|volume=5|issue=3 | |||
|year=2002 | |||
|pages=37-79 | |||
|doi=10.1007/s12113-002-1031-6 | |||
|url=http://mises.org/journals/qjae/pdf/qjae5_3_5.pdf | |||
}} | |||
* {{Cite journal | |||
|last=Kauder|first=Emil|authorlink=Emil Kauder | |||
|title=Genesis of the Marginal Utility Theory: From Aristotle to the End of the Eighteenth Century | |||
|journal=[[Wikipedia:The Economic Journal|The Economic Journal]] | |||
|volume=63|issue=251 | |||
|year=1953 | |||
|pages=638-650 | |||
|doi=10.2307/2226451 | |||
}} | |||
* {{Cite journal | |||
|last=Kauder|first=Emil|authorlink=Emil Kauder | |||
|title=The Retarded Acceptance of the Marginal Utility Theory | |||
|journal=[[Wikipedia:Quarterly Journal of Economics|The Quarterly Journal of Economics]] | |||
|volume=67|issue=4 | |||
|year=1953 | |||
|pages=564-575 | |||
|doi=10.2307/1883602 | |||
}} | |||
* {{Cite book | |||
|last=Kauder|first=Emil|authorlink=Emil Kauder | |||
|title=A History of Marginal Utility Theory | |||
|publisher=[[Wikipedia:Princeton University Press|Princeton University Press]] | |||
|place=Princeton | |||
|year=1965 | |||
|oclc=270555 | |||
}} | |||
* {{Cite journal | |||
|last=Stigler|first=George J.|authorlink=George Stigler | |||
|title=The Development of Utility Theory. I | |||
|journal=Journal of Political Economy | |||
|volume=58|issue=4 | |||
|year=1950 | |||
|pages=307-327 | |||
|doi= | |||
|url=http://www.jstor.org/stable/1828885 | |||
}} | |||
* {{Cite journal | |||
|last=Stigler|first=George J.|authorlink=George Stigler | |||
|title=The Development of Utility Theory. II | |||
|journal=Journal of Political Economy | |||
|volume=58|issue=5 | |||
|year=1950 | |||
|pages=373-396 | |||
|doi= | |||
|url=http://www.jstor.org/stable/1825710 | |||
}} | |||
* {{Cite journal | |||
|last=Stigler|first=George J.|authorlink=George Stigler | |||
|title=The Adoption of the Marginal Utility Theory | |||
|journal=History of Political Economy | |||
|volume=4|issue=2 | |||
|year=1972 | |||
|pages=571-586 | |||
|doi=10.1215/00182702-4-2-571 | |||
}} | |||
===Links=== | |||
* [[Wikipedia:Marginal utility|Marginal utility]] on Wikipedia | * [[Wikipedia:Marginal utility|Marginal utility]] on Wikipedia | ||
* [http://mises.org/story/3100 Diminishing Marginal Utility: It's a Law] by Art Carden | * [http://mises.org/story/3100 Diminishing Marginal Utility: It's a Law] by Art Carden, October 2008 | ||
* [http://mises.org/story/2610 Marginal Utility Is Not Rocket Science] by Frank Shostak | * [http://mises.org/story/2610 Marginal Utility Is Not Rocket Science] by Frank Shostak, June 2007 | ||
* [http://mises.org/story/2628 Marginal Utility and Interest Formation] by Frank Shostak | * [http://mises.org/story/2628 Marginal Utility and Interest Formation] by Frank Shostak, July 2007 | ||
* [http://mises.org/daily/3918 What's Wrong with the Utility Function?] by Predrag Rajsic, December 2009 | |||
* [http://mises.org/daily/4037 It's the Language of Action, Not a Trick] by Predrag Rajsic, February 2010 | |||
* [http://mises.org/daily/5014/What-Can-the-Law-of-Diminishing-Marginal-Utility-Teach-Us What Can the Law of Diminishing Marginal Utility Teach Us?] by Thorsten Polleit, February 2011 | |||
* [http://www.youtube.com/watch?v=rjIPv_TMQTo The Implications of Human Action: Diminishing Marginal Utility and Supply-and-Demand Curves] online video | |||
[[Category:Economic concepts]] | |||
Latest revision as of 17:03, 26 July 2013
People use their means for the most important ends. If they have to give up a unit of their stock, they will continue to satisfy the more important ends. The satisfaction provided by the marginal unit is called marginal utility.[1]
Law of Marginal utility
People make decisions on the margin. No one chooses between "guns" or "butter", but between a definite amount of guns and a definite amount of butter.
As an actor acquires more and more units of a good, he devotes them to successively less and less urgent ends (i.e. ends that are lower on his scale of values). Therefore the marginal utility of a good declines as its supply increases. This is the law of diminishing marginal utility.[2]
References
- ↑ Murray N. Rothbard. "B. The Law of Marginal Utility", Man, Economy and State, online version, referenced 2009-07-07.
- ↑ Robert P. Murphy. "A Study Guide to Murray Rothbard's Man, Economy, and State, with Power and Market", Chapter 1, referenced 2009-07-07.
See also
Bibliography
- Böhm-Bawerk, Eugen von (2002). "Value, Cost, and Marginal Utility". The Quarterly Journal of Austrian Economics 5 (3): 37-79. doi:10.1007/s12113-002-1031-6. http://mises.org/journals/qjae/pdf/qjae5_3_5.pdf.
- Kauder, Emil (1953). "Genesis of the Marginal Utility Theory: From Aristotle to the End of the Eighteenth Century". The Economic Journal 63 (251): 638-650. doi:10.2307/2226451.
- Kauder, Emil (1953). "The Retarded Acceptance of the Marginal Utility Theory". The Quarterly Journal of Economics 67 (4): 564-575. doi:10.2307/1883602.
- Kauder, Emil (1965). A History of Marginal Utility Theory. Princeton: Princeton University Press. OCLC 270555.
- Stigler, George J. (1950). "The Development of Utility Theory. I". Journal of Political Economy 58 (4): 307-327. http://www.jstor.org/stable/1828885.
- Stigler, George J. (1950). "The Development of Utility Theory. II". Journal of Political Economy 58 (5): 373-396. http://www.jstor.org/stable/1825710.
- Stigler, George J. (1972). "The Adoption of the Marginal Utility Theory". History of Political Economy 4 (2): 571-586. doi:10.1215/00182702-4-2-571.
Links
- Marginal utility on Wikipedia
- Diminishing Marginal Utility: It's a Law by Art Carden, October 2008
- Marginal Utility Is Not Rocket Science by Frank Shostak, June 2007
- Marginal Utility and Interest Formation by Frank Shostak, July 2007
- What's Wrong with the Utility Function? by Predrag Rajsic, December 2009
- It's the Language of Action, Not a Trick by Predrag Rajsic, February 2010
- What Can the Law of Diminishing Marginal Utility Teach Us? by Thorsten Polleit, February 2011
- The Implications of Human Action: Diminishing Marginal Utility and Supply-and-Demand Curves online video