Enter the final and the initial number of units consumed and the initial and final total utility. The calculator will evaluate and display the marginal utility.

Marginal Utility Formula

The following formula is used to calculate the marginal utility of a good or service.

MU = UI – UF / (QF – QI)

  • Where MU is the marginal utility
  • UI is the initial units consumed
  • UF is the final units consumed
  • QF is the final utility
  • QI is the initial utility

Marginal Utility Definition

Marginal utility is a term used in finance to describe the satisfaction gained by a consumer through consuming additional units of a good.

For example, the satisfaction gained from eating an additional donut after eating 1 donut.

In general, the satisfaction will have diminishing returns in units consumed and sometimes negative returns. For example, most people would feel sick eating 20 donuts as opposed to 2.

Marginal Utility Example

How to calculate marginal utility?

First, determine the initial amount of units and the utility at that quantity of units.

For this example problem, the total amount of units is 50 and the utility is 4.

Next, determine the final number of units and final utility. This is the number of units and utility after the quantity has been increased by a certain amount. The amount the value is increased depends on the study and analysis.

For this example, the final quantity and utility are 100 and 6.

Finally, calculate the marginal utility using the formula above:

MU = UI – UF / (QF – QI)

MU = 6-4 / (100 -50)

MU = 2/ 50 = 1/25 = .04 marginal utility per unit increase

FAQ

What is a marginal utility?

A marginal utility is a measure of how a customer satisfaction changes with an increase in consumption of a good or service.

How to calculate marginal utility?

  1. First, determine the initial units and initial utility.

    Measure the initial units and initial utility.

  2. Next, determine the final units and final utility.

    Measure the final units and final utility.

  3. Finally, calculate the marginal utility.

    Using the formula above, calculate the marginal utility.

marginal utility calculator
marginal utility formula