Q:

What is the difference between total utility and marginal utility?

A:

Quick Answer

Total utility is the total amount of utility gained from the total amount of a resource consumed, while marginal utility is the amount of utility gained from the consumption of each unit of a resource. Total utility tends to suffer from diminishing returns, where the additional utility of each unit of a resource consumed is reduced after the first. Utility is not a truly objective measurement, and estimates of both marginal and total utility are largely subjective.

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Full Answer

Utility is a useful concept in economics, but it is a very imprecise and individual one. It depends on setting units for the amount of utility, or usefulness, of an item, which can mean anything from how much money one makes, to how much satisfaction one takes, from each unit consumed. For instance, a company could note a difference between the price of a bike sold with a particular decal added versus one without. That difference in price is an indication of the marginal utility of the decal to the bicycle buyer. Further decals may increase the total utility of the bike further, although the marginal utility is likely to decrease for each decal added, which means the increase in price will be less with each decal.

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