Foundations of Economics, 8th Edition

13.2 Marginal Utility Theory

MyEconLab Concept Video

The budget line tells us about consumption possibilities, but it doesn’t tell us a per-­ son’s consumption choice. Choices depend on possibilities and preferences. To describe preferences, economists use the concept of utility.^* Utility is the benefit or satisfaction that a person gets from the consumption of a good or service. To ­understand how we use utility to explain people’s choices, we distinguish ­between two concepts:

*Economists also use an alternative method of describing preferences called indifference curves, which are described in the optional appendix to this chapter.

Utility

The benefit or satisfaction that a person gets from the consumption of a good or service.

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