Marginal Utility Calculator

Formula

The formula to calculate the marginal utility (MU) is:

\[ MU = \frac{Q_F - Q_I}{U_F - U_I} \]

Where:

\( MU \) is the marginal utility
\( U_I \) is the initial units consumed
\( U_F \) is the final units consumed
\( Q_F \) is the final utility
\( Q_I \) is the initial utility

What is Marginal Utility?

Marginal utility is a term used in finance to describe the satisfaction gained by a consumer through consuming additional units of a good. For example, the satisfaction gained from eating an additional donut after eating one donut. In general, the satisfaction will have diminishing returns with more units consumed and sometimes negative returns. For example, most people would feel sick eating 20 donuts as opposed to 2.

Example Calculation

Let's assume the following values:

Initial Units Consumed (U_I): 1
Final Units Consumed (U_F): 2
Initial Utility (Q_I): 10
Final Utility (Q_F): 18

Using the formula to calculate the marginal utility:

\[ MU = \frac{18 - 10}{2 - 1} = \frac{8}{1} = 8 \]

The Marginal Utility (MU) is 8.