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3.2 UTILITY FUNCTIONS 79
Principle of Diminishing Marginal Utility
When drawing total utility and marginal utility curves, you should keep the following
points in mind:

• Total utility and marginal utility cannot be plotted on the same graph. The horizontal
axes in the two panels of Figure 3.2 are the same (both representing the number
of hamburgers consumed each week, y), but the vertical axes in the two graphs
are not the same. Total utility has the dimensions of U (whatever that may be),
while marginal utility has the dimensions of utility per hamburger ( U divided
by y). Therefore, the curves representing total utility and marginal utility must
be drawn on two different graphs.
• The marginal utility is the slope of the (total) utility function. The slope at any point
on the total utility curve in panel (a) of Figure 3.2 is ¢U ¢y , the rate of change
in total utility at that point as consumption rises or falls, which is what marginal
utility measures (note that ¢U ¢y at any point is also the slope of the line seg-
ment tangent to the utility curve at that point). For example, at point B in panel
(a) of Figure 3.2: slope of utility curve U( y) 0.25 (i.e., ¢U ¢y 0.25 when
y 4) slope of tangent line segment RS marginal utility at that point
value of vertical coordinate at point B¿ on marginal utility curve MU in panel (b).
y
• The relationship between total and marginal functions holds for other measures in eco-
nomics. The value of a marginal function is often simply the slope of the corre-
sponding total function. We will explore this relationship for other functions
throughout this book.

In Figure 3.2(b), Sarah’s marginal utility declines as she eats more hamburgers.
This trend illustrates the principle of diminishing marginal utility: After some point, principle of diminish-
as consumption of a good increases, the marginal utility of that good will begin to fall. ing marginal utility
Diminishing marginal utility reflects a common human trait. The more of something The principle that after
we consume, whether it be hamburgers, candy bars, shoes, or baseball games, the less some point, as consump-
additional satisfaction we get from additional consumption. Marginal utility may not tion of a good increases,
the marginal utility of that
decline after the first unit, the second unit, or even the third unit. But it will normally good will begin to fall.
fall after some level of consumption.
To understand the principle of diminishing marginal utility, think about the addi-
tional satisfaction you get from consuming another hamburger. Suppose you have
already eaten one hamburger this week. If you eat a second hamburger, your utility will
go up by some amount. This is the marginal utility of the second hamburger. If you
have already consumed five hamburgers this week and are about to eat a sixth ham-
burger, the increase in your utility will be the marginal utility of the sixth hamburger.
If you are like most people, the marginal utility of your sixth hamburger will be less
than the marginal utility of the second hamburger. In that case, your marginal utility
of hamburgers is diminishing.

Is More Always Better?
What does the assumption that more is better imply about marginal utility? If more of
a good is better, then total utility must increase as consumption of the good increases.
In other words, the marginal utility of that good must always be positive.
In reality this assumption is not always true. Let’s return to the example of con-
suming hamburgers. Sarah may find that her total utility increases as she eats the first,
second, and third hamburgers each week. For these hamburgers, her marginal utility