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
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
- ↑ Murray N. Rothbard. "B. The Law of Marginal Utility", Man, Economy and State, online version, referenced 2009-07-07.
- ↑ Robert P. Murphy. "A Study Guide to Murray Rothbard's Man, Economy, and State, with Power and Market", Chapter 1, referenced 2009-07-07.
See also
Bibliography
- Böhm-Bawerk, Eugen von (2002). "Value, Cost, and Marginal Utility". The Quarterly Journal of Austrian Economics 5 (3): 37-79. doi:10.1007/s12113-002-1031-6. http://mises.org/journals/qjae/pdf/qjae5_3_5.pdf.
- Kauder, Emil (1953). "Genesis of the Marginal Utility Theory: From Aristotle to the End of the Eighteenth Century". The Economic Journal 63 (251): 638-650. doi:10.2307/2226451.
- Kauder, Emil (1953). "The Retarded Acceptance of the Marginal Utility Theory". The Quarterly Journal of Economics 67 (4): 564-575. doi:10.2307/1883602.
- Kauder, Emil (1965). A History of Marginal Utility Theory. Princeton: Princeton University Press. OCLC 270555.
- Stigler, George J. (1950). "The Development of Utility Theory. I". Journal of Political Economy 58 (4): 307-327. http://www.jstor.org/stable/1828885.
- Stigler, George J. (1950). "The Development of Utility Theory. II". Journal of Political Economy 58 (5): 373-396. http://www.jstor.org/stable/1825710.
- Stigler, George J. (1972). "The Adoption of the Marginal Utility Theory". History of Political Economy 4 (2): 571-586. doi:10.1215/00182702-4-2-571.
Links
- Marginal utility on Wikipedia
- Diminishing Marginal Utility: It's a Law by Art Carden, October 2008
- Marginal Utility Is Not Rocket Science by Frank Shostak, June 2007
- Marginal Utility and Interest Formation by Frank Shostak, July 2007
- What's Wrong with the Utility Function? by Predrag Rajsic, December 2009
- It's the Language of Action, Not a Trick by Predrag Rajsic, February 2010
- What Can the Law of Diminishing Marginal Utility Teach Us? by Thorsten Polleit, February 2011
- The Implications of Human Action: Diminishing Marginal Utility and Supply-and-Demand Curves online video
