Segment Margin

And finance Allah shmoop what our total utility and marginal

utility utility is in the eye of the beholder One

person might see high utility in some delicious slices of

pineapple pizza while another person only sees negative utility because

they believe pineapple on pizza together are tantamount to blasphemy

Well same goes with a nice car which has not

only transport utility but social utility One person might decide

they'll gain some much needed social points with a snazzy

a set of wheels there while another person might be

afraid they'd be you know beauty is a tool you

know Been there done that A convertible might offer high

utility around for someone living in Southern California and low

utility for someone living in New York where they take

the subway everywhere High quality socks for Christmas Yeah hi

utility If that's just what you needed Maybe you can't

get enough Willie socks or you collect socks with cool

patterns and need a real hobby Quickly Low utility If

you're a ten year old boy who was expecting something

decent not not socks Yeah Sorry there pal How much

utility Something Khun give someone Depends on that person's needs

and preferences utility even has its own standard measurement You

tools Yeah that's one standard utilities you don't well getting

into the nitty gritty of utility We have marginal utility

and total utility Marginal utility is the UDA Lt's a

consumer games from consuming one more unit of a good

or service Those marginal yodels added up well Is Total

Utility III the total amount of utility gained from a

good or service So let's take popcorn Salty buttery movie

theater popcorn you can't resist It's buttery goodness Plus you

don't go to the movies that off and you deserve

this popcorn In general we decide to buy something when

the march on the utility of a good or service

is greater than the marginal cost of it Well in

this case you're willing to pay that five bucks for

the popcorn because it's so worth it Yes all fourteen

thousand calories in that bucket Will the first bite of

popcorn is the most delicious Ah high marginal utility and

it gets your taste buds watering and ready for more

The second bite is great too as is the third

and fourth Lots of you tells Eventually though you don't

feel so good you just consumed more fake butter than

you'd wish on your worst enemy All of a sudden

you stopped eating the buttery deliciousness It's not worth a

full blown a stomach ache in the eight thousand calories

for the rest of the night So as you can

see your demand for popcorn like your demand Kerr for

most things is downward sloping The marginal value of that

in plus one piece of popcorn declines really fast when

marginal cost is greater than marginal utility while we stop

consuming additional marginal units of a good in this case

the marginal cost of eating one more handful of popcorn

plus the money you already paid for it just isn't

worth the marginal benefit you'd get out of the next

hand Phil since well it'll make you feel worse overall

All right well if you're the kind of person who

does keep eating it well even though you're not enjoying

it anymore because you paid for it well that's falling

for the sunk cost Fallaci yet don't do that It

doesn't make sense to pay for negative marginal utility Just

take your net positive utility and walk away slowly right

that's the sunk cost already paid It sunk its guns

Nothing you can do about it ever to get it

back All right well this downward spiral of marginal utility

starting out high with first unit of consumption and finishing

low with the last unit of consumption is called the

law of diminishing marginal returns As we consume more and

more of a good or service are marginal utility from

each additional unit consumed gets less and less Each bite

is less enjoyable than the last While some goods and

services we consumer subject to diminishing marginal utility like food

others can have constant or increasing marginal utility When people

first became addicted to a social media platform it's likely

their marginal utility was increasing which is why they started

using it more and more and more and more and

then became hooked And this is why we care about

marginal utility It often changes as we consume more and

more of a certain good or service If you want

to know how and why people consumers a bit of

a good or service the way they do well take

a look at their marginal utility when we want to

take a step back and look at the big picture

of a good or service Yeah that's where total utility

comes in If you want to compare goods and services

against each other while you can compare their total utilities

for instance don't regret that bucket of popcorn Your total

utility from popcorn consumption was decidedly worth the cost Each

bit of marginal utility from each bite added to the

total utility of the entire popcorn experience So it was

a good overall net of everything to you if anything

Well you should regret that one colonel and you still

have stuck in the back Your teeth there With any

luck it'll come out by Tuesday All right that's enough 00:04:43.615 --> [endTime] You tools Ah