Saturday, June 1, 2013

What is the difference between marginal utility and diminishing marginal returns?

These are quite different things.  Marginal utility refers to the benefit you get from something.  For example, you get huge marginal utility when you buy your first car and no longer have to walk.  Or if you're starving and you buy your first hamburger.  So this talks about the value a consumer gets from buying something.


Diminishing marginal returns refers to how much a business makes by hiring new workers.  So it's talking about the production end of things whereas marginal utility is talking about consumption.


So I guess you could say they are both concerned with how much use you get from something or how much good it does you, but they are not really very similar ideas.

No comments:

Post a Comment