Marginal utility is the additional or extra utility derived from the consumption of one more unit of the given commodity or product.This utility derived from the last unit of a commodity or product purchase.
Example- Travel agencies advertise for certain tour packages with attractive prices and announce a free ticket if there are five tickets booked. Or the first 100 bookings get 10% reduction in the tariff.
Example- Travel agencies advertise for certain tour packages with attractive prices and announce a free ticket if there are five tickets booked. Or the first 100 bookings get 10% reduction in the tariff.
MU = Change in Total Utility/ Change in number of units = ∆TU/∆Q
Characteristics of Utility:
The following are the important characteristic features of utility:
1. utility has no ethical or moral significance:
A commodity which satisfies any type of want, whether moral or immoral, socially desirable .
2. Utility is Psychological:
Utility of a commodity depends on a consumer’s mental attitude and assessment regarding its power to satisfy his particular want.
3. Utility diminishes over time:
The shorter the time period,the more quickly marginal utility diminishes.
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