Economists use the same one-more-unit thinking (Marginal Benefit, Marginal Cost and Sunk Costs) to describe the benefit people get from buying things. They call that benefit utility, measured in made-up units called utils.
Key idea
Total utility (TU) is the satisfaction from all the units you consume. Marginal utility (MU) is the extra satisfaction from one more unit: $MU = \Delta TU$. The law of diminishing marginal utility: as you consume more of a good in a period, each extra unit usually adds less than the one before. Total utility rises as long as MU is positive, peaks where MU reaches zero, and falls only if MU turns negative.
Why it works
The first slice of pizza meets your most urgent want, hunger. The second still tastes good, but you're less hungry; by the fifth, you're nearly full. Each unit serves a less pressing want, so it adds less. Total utility is the running sum of the marginal utilities: adding a smaller positive number still makes the total bigger. Only adding a negative MU (the slice that makes you feel sick) makes the total fall.
Worked example: From totals to marginals
Total utility from slices of pizza is 20, 34, 44, 50, 52 and 50 utils for 1 to 6 slices. Find the marginal utility of each slice. Where is total utility highest?
- MU of slice 1: $20 - 0 = 20$. Slice 2: $34 - 20 = 14$. Slice 3: $44 - 34 = 10$.
- Slice 4: $50 - 44 = 6$. Slice 5: $52 - 50 = 2$. Slice 6: $50 - 52 = -2$.
- MU falls from the start, but TU keeps rising through slice 5, because each MU is still positive. TU is highest at 5 slices.
Answer: MU: 20, 14, 10, 6, 2, −2. Total utility is highest at 5 slices.
Common mistake
Thinking total utility falls as soon as marginal utility falls. From slice 1 to slice 5, MU drops every time, yet TU rises every time. A smaller gain is still a gain. Check: TU falls only when an MU is negative.
No one can measure satisfaction in utils. The numbers are a way to describe how people rank choices, and the conclusions in this unit depend only on that ranking: which option adds more.