Marginal Utility

Utility

Satisfaction or happiness from consuming goods or services

Total Utility (TU)

Cumulative satisfaction from consuming a certain quantity of a good

Marginal Utility (MU)

Extra satisfaction from consuming one more unit. MU=ΔTU/ΔQ

Law of Diminishing Marginal Utility

As more units are consumed, MU decreases (can become zero or negative). MRSxy​=MUx​/MUy​

Marginal Rate of Substitution (MRS)

The rate at which a consumer trades off one good for another while keeping utility constant. It equals the ratio of marginal utilities:

Consumer Equilibrium / Utility Maximization

Given prices, consumers maximize utility by equalizing MU per dollar across goods:MU1​/P1​=MU2​/P2

Total Utility Curve

TU rises at a decreasing rate, peaks when MU = 0, then may decline if MU turns negative

Marginal Utility Curve

Downward‑sloping curve (MU vs. quantity), reflecting the law of diminishing MU

Indifference Curves

Convex, downward‑sloping curves representing combinations of two goods yielding equal utility. Slope at a point = –MRS

Budget Constraint + Indifference Map

Tangency point indicates optimal combination where MRS = price ratio