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Utility refers to the satisfaction and or enjoyment one receives from consuming a good. Marginal utility is the amount change of satisfaction from consuming one additional unit of good or service. (Hubbard & O’Brien, 2021). Between these two, marginal utility is best suited to understand at what unit of consumption the most satisfaction is received. This is useful in analyzing due to budge constraints, where an individual may not be able to purchase at the top point of total utility.
As with any resource, money is a constraint resource to a point. Due to this, analyzing marginal utility per dollar allows an individual to see at what dollar amount they receive the optimal satisfaction. (Hubbard & O’Brien, 2021). As we see, marginal utility will increase at a slower rate as units of goods or services increase. At the optimal point of total utility, we will see marginal utility to be negative. Analyzing marginal utility on a per-unit dollar basis allows us to see where the greatest marginal utility per dollar is at.
Reference:
Hubbard, R. G., & O’Brien, A. P. (2021). Economics (8th ed.). Prentice Hall. ISBN-13: 9780135957554
