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== | ||
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* [http://mises.org/daily/3918 What's Wrong with the Utility Function?] by Predrag Rajsic, December 2009 | * [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/4037 It's the Language of Action, Not a Trick] by Predrag Rajsic, February 2010 | ||
[[Category: | [[Category:Economical Concepts]] | ||
Revision as of 14:23, 15 July 2010
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.
External 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