What matters is how thisĬompares to other things. Is not that this is 100 or 1,000 or a million. I'm not saying it'sĮquivalent to 100 berries. So this is saying that firstĬhocolate bar- obviously, if I have no chocolateĬhocolate bars- and this is saying that thatįirst chocolate bar has a marginal utility. In the case of chocolateīars, each incremental bar, and in the case of fruit, each Little tables here, I've shown the marginal We're going to talkĪbout chocolate bars, and we are going to The basket of goods someone might purchase depending Use that to come up with some conclusions about Up with a measuring scale, and it's a somewhat Going to use the term utility, and we're going to come It either in dollars or in terms of some other goods. While when they talkĪbout marginal benefit, they tend to measure You can view themĪs utility unit, some type of satisfaction units. In terms of some type of absolute measure that Talk about utility, they tend to measure it How the words tend to be used in the context ofĪ traditional microeconomics class. Things different? And the simple answer is,Ĭonceptually, they aren't. The word benefit when I defined the word utility. The next incremental chocolate bar or the next Or, you could thinkĪbout marginal utility, the utility I'm getting from So obviously, you couldĬhocolate bars, you could say the total utility I'm We give to the next chocolate bar and then theĬhocolate bar after that? And we're going to do theĪbout demand curves and how things relate to priceĪnd the price of other goods and things like that. Getting one chocolate bar? And then what's the value that Some arbitrary way of measuring utility and then just Of another squirrel, we were talking aboutĪbout it in terms of another good or service. Talked about the production possibilitiesįrontier and we talked about the marginal benefit Heard the word many times- we were talking about The incremental- we're talking about, and we've Of getting an incremental Honda Civic was $5,000. In terms of dollars, where we said, hey, the benefit Measuring benefit or value, we either measured Going to take in this video is going to be Value do you get out of getting a good or service. Saying how much benefit or satisfaction or Utility- utility, which is really just a way of Video is think about a concept that we've already thought At this point, the gradient (derivative) of the indifference curve (MUy/MUx) equals the gradient of the budget line (Py / Px) so MUy/MUx = Py/Px. The total utility is maximised at the point on the budget line, where an indifference curve is tangential to the budget line. Thus the total utility derived cannot be increased by trading a marginal unit of X for Y, or Y for X, so the total utility derived from the collection is at a maximum.Ī more intuitive way of thinking about it is to consider the individual's indifference map related to the two commodities. The same is true if X is decreased by a marginal unit, and Y is increased by a marginal unit (assuming that the commodities can be divided into small enough units, technically continuous). Therefore, increasing your collection by a marginal unit of X (& decreasing by a marginal unit of Y) has the same utility and same cost as the initial collection. The equation is equivalent to: MUx / MUy = Px/Py, so the ratio of the marginal utilities is equal to the ratio of prices.
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