Final Utility
Final Utility is the utility of a good applied to our least desirable use of it. That is, the last (i.e., least important) use of a supply. If a use of a good must be given up, it will logically be the last use of the good we would choose. That is, we give up the least important of our satisfactions first--which would be satisfied by the last good.
For example, if we lost a unit of a good, the value of the loss would be the value of the least important use of the good. This last good, which represents its final utility, was being applied to our least important wants. In the case of the lost good, it is replaced and the value to which we can assign the loss is not the value of the first most important use of the good, but the least important--what we call the final utility.[1]
According to the law of marginal utility, the value of each good in a stock of identical goods is utility of the last and most easily dispensable unit.[2]
Ludwig von Mises writes:
"When face with the problem of the value to be attached to one unit of a homogeneous supply, man decides on the basis of the value of the least important use he makes of the units of the whole supply; he decides on the basis of marginal utility."[3]
Reference
- ↑ Böhm-Bawerk, Eugen von. "The Law of Final Utility - Eugen von Böhm-Bawerk - Mises Daily ." The Ludwig von Mises Institute . http://mises.org/daily/4637 (accessed April 29, 2011).
- ↑ von Böhm-Bawerk, Eugen, trans. George Reisman. "Eugen von Böhm-Bawerk’s “Value, Cost, and Marginal Utility”." Ludwig von Mises Institute. mises.org/pdf/asc/2002/asc8-reisman.pdf (accessed April 30, 2011).
- ↑ Ludwig von Mises. VII. Action Within The World, 1. The Law of Marginal Utility, Human Action, online version, referenced 2011-04-30.