ECON1101 - Utility

Utility is the satisfaction derived from people's consumption activities.

Utility Maximisation Assumption

The assumption that people try to allocate their incomes so as to maximise their satisfaction.

Marginal Utility

The additional utility gained from consuming an additional unit of a good in a given period of time.

Calculating Marginal Utility

\begin{align} \frac {\text{Utility per Unit}}{\text{Dollars per Unit}} \end{align}

Law of Diminishing Marginal Utility

The tendency for the marginal utility to diminish as consumption increases beyond a certain point.

Marginal Product

The additional output from the addition of an extra unit of a resource; e.g. workers