What is marginal utility? What is the marginal rate of substitution? What is the relationship between total ut
Answer:
Even though I'm probably doing your homework for you, I'll try and help you understand the concepts.
Utility as a whole is the amount of satisfaction you get out of something. It's really kind of an abstract concept because you can't measure it and it's different for everyone... Let's say you really like apples but you only like oranges a little bit... In this case you may get 10 utils out of an apple and only 5 out of an orange (I just made the numbers up... utility can't be quantifiably measured).
Now, I'm sure you've heard the term "law of diminishing marginal utility"? This is important... If you were starving and someone gave you an apple then you would get a lot of utility out of it, but if you had already had eaten 7 apples then you probably wouldn't want to eat another one, so you wouldn't get very much satisfaction out of an 8th apple. That is what marginal utility is... the amount of satisfaction you get out of getting one more of something. So the marginal utility of the first apple would be 10... the next may be 8... the next may be 6. at some point you are not going to get any satisfaction out of another apple so the marginal utility would be 0 for that apple.
Now, let's say someone gave you 3 apples. You were really hungry and enjoyed the first apple so you got 10 utils out of it... not as much for the second so you got 8... even less for the third so you got 6. Those numbers would be the marginal utility, but since you got utility from each of the apples, the total utility that you got from eating them all would be 10 + 8 + 6 = 24. Total utility is the sum of all the individual marginal utilities for each unit.
Marginal rate of substitution is basically just a relationship between two different things. If you get 10 utils from apples and 5 from oranges then someone would have to give you 2 oranges in order for you to be as happy as you would be with just one apple.... it's more complicated than that (it involves prices) but it doesn't sound like you're class is at that level yet.
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