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The Epic Interactive Encyclopedia 1998
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Epic Interactive Encyclopedia, The - 1998 Edition (1998)(Epic Marketing).iso
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Marginal_utility
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1992-09-03
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In economics, the measure of additional
satisfaction (utility) gained by a consumer
who receives one additional unit of a product
or service. The concept is used to explain
why consumers buy more of a product when the
price falls. An individual's demand for a
product is determined by the marginal utility
(and the point at which he has sufficient
quantity). The greater the supply of the item
available to him, the smaller the marginal
utility. In total utility, supply is the main
price determinant. The total utility of
diamonds is low because their use is mainly
decorative, but because of their rarity, the
price is high, and the marginal utility is
high. On the other hand, the total utility of
bread is high because it is essential, but
its marginal utility may be very low because
it is plentiful, making it much cheaper than
diamonds.