Utility & marginal utility

Utility is a way to describe the satisfaction a person gets from consuming goods. Marginal utility is the extra satisfaction from one more unit — and it usually shrinks the more you already have.

• Diminishing marginal utility: the second slice of pizza delights you less than the first.
• Consumers maximise utility by equalising marginal utility per dollar across goods.
• It explains why demand curves slope down — extra units are worth less, so you'll only buy them at a lower price.