Google
Friday 
June 23, 2017 

AmosWEB means Economics with a Touch of Whimsy!

AmosWEBWEB*pediaGLOSS*aramaECON*worldCLASS*portalQUIZ*tasticPED GuideXtra CrediteTutorA*PLS
AE LINE: Another term for aggregate expenditure line, which is a line representing the relation between aggregate expenditures and gross domestic product used in the Keynesian cross. The aggregate expenditure line is obtained by adding investment expenditures, government purchases, and net exports to the consumption line. As such, the slope of the aggregate expenditure line is largely based on the slope of the consumption line (which is the marginal propensity to consume), with adjustments coming from the marginal propensity to invest, the marginal propensity for government purchases, and the marginal propensity to import. The intersection of the aggregate expenditures line and the 45-degree line identifies the equilibrium level of output in the Keynesian cross.

Visit the GLOSS*arama


MARGINAL UTILITY CURVE:

A curve illustrating the relation between the marginal utility obtained from consuming an additional unit of good and the quantity of the good consumed. The negative slope of the marginal utility curve reflects the law of diminishing marginal utility. The marginal utility curve also can be used to derived the demand curve.
Roller Coaster Utility
Marginal Utility
The marginal utility curve is an essential component of consumer demand theory and utility analysis. It graphically captures the relation between the utility generated from the consumption of an additional unit of a good and the quantity of the good consumed. This relation provides a basis for understanding market demand and the law of demand.

To set the stage for the marginal utility curve, consider the table presented here. This table reports the total utility and marginal utility generated when Edgar Millbottom, Shady Valley's resident roller coaster aficionado, spends the day riding the Monster Loop Death Plunge roller coaster at the local Shady Valley Amusement Park. Edgar takes 8 separate rides on the Monster Loop Death Plunge roller coaster, graciously recording the total utility he accumulates after each ride.

The task at hand is to plot the marginal utility values from the table into a graph. The graph below is ideally suited for the construction of the marginal utility curve for Edgar's 8 rides on the Monster Loop Death Plunge roller coaster.

Deriving the Curve
Marginal Utility Curve

First, a few words about the existing graph.

  • The joined axes at the right present the plotting area.

  • The horizontal axis measures quantity, the number of rides on the roller coaster. This ranges from 0 to 8.

  • The vertical axis measures marginal utility, in utils, ranging from 0 to 12.
The next step is relatively easy. Click the [Plot] button to plot points indicating the marginal utility associated with each ride on the roller coaster.
  • For the first ride, marginal utility is 11 utils.

  • For the second rides, marginal utility is 9 utils.

  • For the third ride, marginal utility is 7 utils.

  • And on it goes...
Note that each point is plotted halfway between the previous quantity and the subsequent quantity. This method is used because marginal utility represents a change from one quantity to another.

If the quantity consumed is continuously divisible, rather than coming in discrete amounts, then these eight points represent eight of an infinite number that capture the relation between marginal utility and quantity. To illustrate the other possible points, click the [Curve] button. The resulting line is the marginal utility curve.

Consider these three observations about the curve.

  • The marginal utility curve is negatively sloped. It decreases as the number of rides increases. Each additional ride adds less utility that the preceding one.

  • The marginal utility curve begins in the positive range of values, eventually intersects the horizontal axis, then enters the negative range. The quantity at which the marginal utility curve intersects the horizontal axis (6 rides) of zero marginal utility corresponds with the maximum value of total utility.

  • The negative slope of this marginal utility curve is due to the law of diminishing marginal utility. In that marginal utility plays a primary role in the price buyers are willing and able to pay for good, this provides insight into the negative slope of the demand curve.

  • <= MARGINAL UTILITY AND DEMANDMARGINAL UTILITY OF INCOME =>


    Recommended Citation:

    MARGINAL UTILITY CURVE, AmosWEB Encyclonomic WEB*pedia, http://www.AmosWEB.com, AmosWEB LLC, 2000-2017. [Accessed: June 23, 2017].


    Check Out These Related Terms...

         | marginal utility | marginal utility | law of diminishing marginal utility |


    Or For A Little Background...

         | total utility | util | utility | consumer demand theory | utility analysis | satisfaction |


    And For Further Study...

         | utility maximization | constrained utility maximization | rule of consumer equilibrium | utility measurement | cardinal utility | ordinal utility | diamond-water paradox | marginal utility and demand | utilitarianism | income change, utility analysis | price change, utility analysis | preferences change, utility analysis | price elasticity of demand |


    Search Again?

    Back to the WEB*pedia


    APLS

    PURPLE SMARPHIN
    [What's This?]

    Today, you are likely to spend a great deal of time at a going out of business sale wanting to buy either a set of luggage with wheels or a birthday gift for your aunt. Be on the lookout for telephone calls from former employers.
    Your Complete Scope

    This isn't me! What am I?

    In the early 1900s around 300 automobile companies operated in the United States.
    "The majority of men meet with failure because of their lack of persistence in creating new plans to take the place of those that fail. "

    -- Napoleon Hill, author

    AFC
    Average Fixed Cost
    A PEDestrian's Guide
    Xtra Credit
    Tell us what you think about AmosWEB. Like what you see? Have suggestions for improvements? Let us know. Click the User Feedback link.

    User Feedback



    | AmosWEB | WEB*pedia | GLOSS*arama | ECON*world | CLASS*portal | QUIZ*tastic | PED Guide | Xtra Credit | eTutor | A*PLS |
    | About Us | Terms of Use | Privacy Statement |

    Thanks for visiting AmosWEB
    Copyright ©2000-2017 AmosWEB*LLC
    Send comments or questions to: WebMaster