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Marginal Utility

Marginal Utility - Marginal Utility Example

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Marginal Utility

What is Marginal Utility? What is marginal utility example? What is the law of marginal utility? What is the difference between marginal utility and total utility? Explain the Formula for Marginal Cost with example?

In economics, utility refers to the satisfaction that has been received by the consumer by consuming a particular product or service. Marginal utility applies to the goods and services is considered to be the change in the utility which is being caused by an increase in the consumption of the products and services in the market. In respect to the law of diminishing marginal utility as well as according to some of the economist, it is being said that the first unit of a particular product or service generates more efficiency than the second unit which is being consumed in the process by the consumers in the market. Therefore, it can be said that the marginal utility is the extra utility that is being consumed by the consumers in the market, which is the main factor for the growth of the company in the market and to become successful in the process. The utility gets diminished in the market if the prices become higher in the process. Hence, it can be said that the marginal utility falls in the process as the consumption of the product or services increases in the market. These are essential for the company to understand so that they can grow in the market and can become successful in the process. The change in the marginal utility might enable the company to possess the power, which will be helpful for the company to grow in the market and to become successful in the process. These are essential for the organisation to become popular in the market and to gain success in the process. The power that is being acquired by the company in the market is being judged based on the physical presences as well as what are the resources that are mainly available with the company so that they can grow in the market and can become popular in the process. The power that the company possess is also dependent on the previous decisions that is being made by the company so that they can grow in the market and can become achieve the target what they intend to accomplish in the process, which is essential for the company so that they can compete with the other competitors in the market.

E.g., Suppose one of the consumers possess four bottles of water and is willing to purchase one more bottle. On the other hand, the consumer owns 50 bottles of water and is ready to buy one more. Therefore, the marginal utility that is being consumed by the first consumer who only had four bottles and willing to buy another one will be more than that of the person owns 50 bottles and is ready to purchase another one. These are essential for the company to understand so that they can place their product or service that they are providing to the customers in front of the right target group. These will automatically enable the company to grow in the market and to become successful in the process. The total utility that has been acquired by the first consumer is around 25%.

On the contrary, the service that has been obtained by the second consumer who owns the 50 bottles is comparatively less, and it is about 2%, which is less in the process. Therefore, the organisation must look into the matter so that they can grow in the market and can become popular in the process. These need to be understood by the company so that they can target the consumers in an effective way possible so that the customers can get attracted towards the company and help them to grow in the market and to become popular in the process. Marginal utility is necessary for the company to understand so that they can grow in the market and to become popular in the process. The concept regarding the marginal utility is being introduced in the 19th century, and till now it is applicable for the companies to grow in the market and to measure the financial position of the company so that they can grow in the market and can achieve the success in the process. Lastly, it can be said that the company need to focus more on the segmentation as well as the specification of the product and service that is provided by the company so that they can calculate the marginal utility of the product and can work accordingly so that they can grow in the market and can achieve the target in the process.

There is one law which explains the marginal utility that is decreasing with the increase in the consumption of the product or service provided by the company in the market and that law is termed as the law of diminishing marginal utility. These are essential for the company to understand the law so that they can work accordingly, which will help them achieve the target successfully and let them expand in the market. The law of diminishing marginal utility enables the company to understand that the efficiency of the product or service decreases with the increase in the consumption process, and that is true to some extent. These need to be followed by the company so that they can introduce a variety of products and services from the market so that they can grow in the process.

These are crucial for the company to add the array of the product range in the market so that the customers get attracted towards the brand, and the purchasing process remains in the working condition so that they can grow in the market and can operate successfully in the process. These will ultimately help the company to become popular in the market and to achieve success in the process. So, the company needs to look into the matter so that they grow in the market and can become successful in it. These are important for the company to focus on the marginal utility of the product and service that they are providing to the customers. These will automatically help them to grow in the market and to become popular in the process. The law will also assist the company in meeting the demand as well as the supply of the product and service in the market and enrich their financial position in the market. These are necessary for the growth of the company so that they can capture a considerable market share from the market. The law also enables the company to possess the knowledge regarding the value of the product in the market so that they can become popular in the process and can grow in the market.

Many differences can be looked after by the company as well as the scholars between the marginal utility and the total utility of the products or services provided by the company in the market so that they can grow in the market and can earn profit in the process. The main and the most crucial difference that is there between the two utility is that the complete service refers to the complete satisfaction that is being received by the company from the product or the service. On the other hand, marginal utility refers to the additional comfort that is being received by the consumers by consuming the additional unit of the product or service from the market. These will help the company to gather knowledge regarding the extra effort they need to provide to the customers so that they can grow in the market and can become successful in the process.

The demand for the product is dependent upon the satisfaction that has been received by the customers after consuming product from the market. These are essential for the company to expand in the market and to gain popularity in the process. The satisfaction enables the customers to get attracted towards the product as well as the company and they will avail the services along with the product from the market, which is beneficial for the growth of the company. The company also need to look after the satisfaction that the consumer is getting in the process, which will enable the company to target the audience in an effective way possible so that they can hold on to the customers and will also allow them to take up the strategy which will let them expand in the market. These are essential for the company to look after so that they can even modify the strategy as per the market needs and wants which is necessary for the growth of the company in the market. Therefore, it can be noticed that there is a huge difference betweent the total utility as well as the marginal utility of the product and services in the market.

Marginal cost can be considered to be the extra cost that the company need to incur in the production process for the production of one additional unit of goods and services that the company is providing to the customers. It is being represented with the help of the mathematical term and which is crucial for the company to look after so that they can grow in the market and can achieve the success what they intend to accomplish shortly. Marginal cost can be calculated with the help of the total production cost, total fixed price as well as total variable cost. This three cost can easily enable the company to grow in the market as they assist the company in calculating the marginal cost that the company is incurring in the production process.

The formulae are as follows:

Total production cost = Fixed cost (Total) + Variable cost (Total)

Marginal cost = Change in the total cost / Change in the quantity produced

E.g., Suppose a company incurs a total production cost at $10,000 for producing 5,000 units. In recent time to pace up with the competitors, the company shifted its production from 5,000 units to 7,000 units along with that $10,000 to $ 15,000. Now calculate the marginal cost which will the company is incurring in the process?

Solution:

With the help of the formulae, it can be found out,

Marginal cost = ($15,000 - $10,000) / (7,000 – 5,000)

Or, Marginal cost = ($5,000) / (2,000)

Or, Marginal cost = $2.5 per unit

These imply that the marginal cost of the product has been increased by $2.5 for increasing the output of the company. Therefore, it can be said that the company need to increase the cost of production by $2.5 per unit so that they can match up the marginal cost.

These will ultimately help the organisation to grow in the market and to achieve the success in the process. These are essential for the company to become popular in the market as well, and it will provide additional benefit to the company so that they can attract the customers from the market.

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