People use their means for the most important ends. If they have to give up a unit of their stock, they will continue to satisfy the more important ends. The satisfaction provided by the marginal unit is called marginal utility.
Law of Marginal utility[edit | edit source]
People make decisions on the margin. No one chooses between "guns" or "butter", but between a definite amount of guns and a definite amount of butter.
As an actor acquires more and more units of a good, he devotes them to successively less and less urgent ends (i.e. ends that are lower on his scale of values). Therefore the marginal utility of a good declines as its supply increases. This is the law of diminishing marginal utility.
References[edit | edit source]
- Murray N. Rothbard. "B. The Law of Marginal Utility", Man, Economy and State, online version, referenced 2009-07-07.
- Robert P. Murphy. "A Study Guide to Murray Rothbard's Man, Economy, and State, with Power and Market", Chapter 1, referenced 2009-07-07.
[edit | edit source]
- Marginal utility on Wikipedia
- Diminishing Marginal Utility: It's a Law by Art Carden, October 2008
- Marginal Utility Is Not Rocket Science by Frank Shostak, June 2007
- Marginal Utility and Interest Formation by Frank Shostak, July 2007
- What's Wrong with the Utility Function? by Predrag Rajsic, December 2009
- It's the Language of Action, Not a Trick by Predrag Rajsic, February 2010