Ludwig von Mises Institute

Marginal utility

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People use their means for the most important ends. If they have to give up a unit of their stock, they will continue to satisfy the more important ends. The satisfaction provided by the marginal unit is called marginal utility.[1]

Law of Marginal utility[edit]

People make decisions on the margin. No one chooses between "guns" or "butter", but between a definite amount of guns and a definite amount of butter.

As an actor acquires more and more units of a good, he devotes them to successively less and less urgent ends (i.e. ends that are lower on his scale of values). Therefore the marginal utility of a good declines as its supply increases. This is the law of diminishing marginal utility.[2]

References[edit]

  1. Murray N. Rothbard. "B. The Law of Marginal Utility", Man, Economy and State, online version, referenced 2009-07-07.
  2. Robert P. Murphy. "A Study Guide to Murray Rothbard's Man, Economy, and State, with Power and Market", Chapter 1, referenced 2009-07-07.

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