Utility

How do you know if you're getting more joy from your favorite snack?

Imagine you're eating chocolate, and the first piece is delicious. But as you eat more, you start to feel less excited about each new piece.

The more chocolate you eat, the less happiness each new piece brings. This idea is called "marginal utility."

Example

The first chocolate bar gives you 10 happiness points. The second gives you 7 points. The third gives you 4 points.

Remember this

Marginal utility explains why your excitement for each new chocolate bar decreases.

Text adapted from Wikipedia, licensed under CC BY-SA 4.0.

Related concepts

Marginal utility

Why do you stop eating pizza after a few slices?

Behavioral economics

Why do we feel the sting of loss more than the joy of gain?

Endowment effect

People value owned items more than unowned ones

Veblen good

Veblen goods defy the law of demand

List of cognitive biases

Why do you choose a smaller reward now over a bigger one later?

Quantity theory of money

MV = PY equation

Educational content, not financial advice.

Swipe through more Finance concepts