ShmoopTube

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And finance Allah shmoop what our total utility and marginal

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utility utility is in the eye of the beholder One

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person might see high utility in some delicious slices of

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pineapple pizza while another person only sees negative utility because

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they believe pineapple on pizza together are tantamount to blasphemy

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Well same goes with a nice car which has not

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only transport utility but social utility One person might decide

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

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a set of wheels there while another person might be

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

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know Been there done that A convertible might offer high

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utility around for someone living in Southern California and low

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utility for someone living in New York where they take

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the subway everywhere High quality socks for Christmas Yeah hi

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

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get enough Willie socks or you collect socks with cool

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patterns and need a real hobby Quickly Low utility If

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

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decent not not socks Yeah Sorry there pal How much

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

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and preferences utility even has its own standard measurement You

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

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into the nitty gritty of utility We have marginal utility

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

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consumer games from consuming one more unit of a good

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or service Those marginal yodels added up well Is Total

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Utility III the total amount of utility gained from a

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

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

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

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this popcorn In general we decide to buy something when

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the march on the utility of a good or service

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is greater than the marginal cost of it Well in

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

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

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thousand calories in that bucket Will the first bite of

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popcorn is the most delicious Ah high marginal utility and

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it gets your taste buds watering and ready for more

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The second bite is great too as is the third

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

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feel so good you just consumed more fake butter than

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

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

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full blown a stomach ache in the eight thousand calories

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for the rest of the night So as you can

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see your demand for popcorn like your demand Kerr for

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most things is downward sloping The marginal value of that

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in plus one piece of popcorn declines really fast when

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marginal cost is greater than marginal utility while we stop

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consuming additional marginal units of a good in this case

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the marginal cost of eating one more handful of popcorn

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

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

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

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

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

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

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

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

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take your net positive utility and walk away slowly right

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

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Nothing you can do about it ever to get it

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back All right well this downward spiral of marginal utility

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starting out high with first unit of consumption and finishing

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low with the last unit of consumption is called the

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law of diminishing marginal returns As we consume more and

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more of a good or service are marginal utility from

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each additional unit consumed gets less and less Each bite

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is less enjoyable than the last While some goods and

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services we consumer subject to diminishing marginal utility like food

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others can have constant or increasing marginal utility When people

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

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their marginal utility was increasing which is why they started

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using it more and more and more and more and

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then became hooked And this is why we care about

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marginal utility It often changes as we consume more and

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more of a certain good or service If you want

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to know how and why people consumers a bit of

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a good or service the way they do well take

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a look at their marginal utility when we want to

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take a step back and look at the big picture

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

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comes in If you want to compare goods and services

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against each other while you can compare their total utilities

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

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utility from popcorn consumption was decidedly worth the cost Each

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bit of marginal utility from each bite added to the

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total utility of the entire popcorn experience So it was

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a good overall net of everything to you if anything

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Well you should regret that one colonel and you still

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have stuck in the back Your teeth there With any

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

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