What does increase or decrease in marginal utility mean in terms of quantity demanded? According to the definition of marginal utility &quot; it is the utility or satisfaction derived from the consumption of an additional unit of any commodity.&quot;
So, the question is what does increase or decrease in Marginal Utility of a good, let's say X, will mean and how we can relate it to quantity demanded?
This whole thing came while I was going through Edgeworth-Pareto definition of Complementary and Substitute goods. Thanks in advance.
Typically, we have concave, increasing utility functions. So that means, the more you consume of a good x the more utility you have. However, the marginal utility (the first derivative of the utility function) is decreasing in consumption. So each additional unit of consumption has less additional value than the one before.
A simple example would be food. If you're starving, that first bite of food has the highest utility. But one you get full, additional bites will only have a little additional utility. So the more you consume, the less satisfaction from each additional bite.
In this sense, a higher marginal utility, means a lower level of consumption. That could mean a higher demand.