Section 1
The Demand Curve and Utility
Book
Version 3
By Boundless
By Boundless
Boundless Economics
Economics
by Boundless
4 concepts
Defining Utility
Utility is an economic measure of how valuable, or useful, a good or service is to a consumer.
Theory of Utility
The theory of utility states that, all else equal, a rational person will always choose the option that has the highest utility.
Marginal Utility
Marginal utility of a good or service is the gain from an increase or loss from a decrease in the consumption of that good or service.
Principle of Diminishing Marginal Utility
The principle of diminishing marginal utility states that as more of a good or service is consumed, the marginal benefit of the next unit decreases.