Marginal Utility Theory

Discipline: Economics

Proposed in the late 19th century by the Marginalist group of economists, who used differential calculus to study the impact of small changes in economic quantities, marginal utility refers to the additional satisfaction a consumer derives from the consumption of one extra unit of a product.

Thus, an individual's demand for a product is determined not by the total utility of it but by its marginal utility. Therefore, the greater the supply of a product, the smaller its marginal utility.

The Marginalists rejected the labor theory of value which had previously been central to classical economics.

Source:
R D Black, A W Coats and C D W Goodwin, The Marginal Revolution in Economics (Durham, NC, 1973)

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