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In economics, marginal utility describes the change in utility (pleasure or satisfaction resulting from the consumption) of one unit of a good or service. [1] Marginal utility can be positive, negative, or zero. Negative marginal utility implies that every additional unit consumed of a commodity causes more harm than good, leading to a decrease ...
Paradox of value. Water is a commodity that is essential to life. In the paradox of value, it is a contradiction that it is cheaper than diamonds, despite diamonds not having such an importance to life. The paradox of value (also known as the diamond–water paradox) is the contradiction that, although water is on the whole more useful, in ...
In economics, utility is a measure of the satisfaction that a certain person has from a certain state of the world. Over time, the term has been used in at least two different meanings. In a normative context, utility refers to a goal or objective that we wish to maximize, i.e. an objective function.
v. t. e. Marginalism is a theory of economics that attempts to explain the discrepancy in the value of goods and services by reference to their secondary, or marginal, utility. It states that the reason why the price of diamonds is higher than that of water, for example, owes to the greater additional satisfaction of the diamonds over the water.
t. e. The subjective theory of value (STV) is an economic theory for explaining how the value of goods and services are not only set but also how they can fluctuate over time. The contrasting system is typically known as the labor theory of value . STV's development helped to better understand human action and decision making in economics.
t. e. The theory of consumer choice is the branch of microeconomics that relates preferences to consumption expenditures and to consumer demand curves. It analyzes how consumers maximize the desirability of their consumption (as measured by their preferences subject to limitations on their expenditures), by maximizing utility subject to a ...
The term “ marginal cost ” may refer to an opportunity cost at the margin, or more narrowly to marginal pecuniary cost — that is to say marginal cost measured by forgone cash flow . Other marginal concepts include (but are not limited to): marginal physical product (sometimes also known as “marginal product”) marginal product of labor.
Gossen's laws, named for Hermann Heinrich Gossen (1810–1858), are three laws of economics: Gossen's First Law is the "law" of diminishing marginal utility: that marginal utilities are diminishing across the ranges relevant to decision-making. Gossen's Second Law, which presumes that utility is at least weakly quantified, is that in ...