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# Marginal Utility, Price And Paradox Of Value In Economics

Marginal Utility: Marginal utility is the additional utility derived by an individual from the consumption of one or more unit of a commodity. Marginal utility denotes the change in the total utility due to the change in quantity consumed of commodity. Marginal utility influences and regulates the price determination of a commodity. This may be explained by the following table.

### How Does Marginal Utility Determine Price:

 Number of Mangoes Marginal Utility (in utils) Total Utility of Money In Dollars 1 20 \$1 2 15 \$0-75 cents 3 12 \$0-50 cents 4 8 \$0-30 cents

The above table shows the consumption behavior of an individual. A consumer is willing to spend USD.1 for purchasing a mango. He gets 20 utils of Marginal Utility from the consumption of the first mango. Since he is hungry and since his desire for mangoes is great, he finds it worthwhile to spend USD.1 on the first mango. As his desire was satisfied to some extent, he prefers to pay a less amount of price namely 75 cents for the second mango. The second mango gives him 15 utils of marginal utility. He spends 50 cents and 30 cents for Purchasing 3rd and 4th unit of the mangoes respectively. As his desire for mangoes is diminishing, he considers it better to spend less amount of money for their purchase. Consequently the marginal utility derived from the 3rd and 4th mangoes remains less at 12 and 8 utils respectively. Hence marginal utility influences and determines the price of a commodity. The price of a commodity is proportional to the marginal utility. The higher the marginal utility, the greater will be the price paid by a consumer.