Marginal Utility Examples

Updated November 6, 2020

There is often something extra satisfying about obtaining or using more than one of a certain item, whether that item is a can of soda, a pair of jeans, or an airline ticket. The extra satisfaction is an economic term called marginal utility. There are several types of marginal utility, including zero, positive, negative, increasing, and diminishing marginal utility.

Zero Marginal Utility

  • When you put your money into a machine to purchase a newspaper, the door opens, and you could presumably take more than one newspaper. However, there is typically little to no satisfaction in having more than one edition of the same newspaper.
  • For some reason you receive two of the same magazine in the mail instead of the usual one. Though you greatly enjoy reading the first copy of the magazine, there is no satisfaction found in reading a second copy.
  • If you have several coupons for the same item but only plan to purchase one of that item, there is zero marginal utility in having those extra coupons.
  • A family of five purchases tickets to an amusement park, and is told there is a "buy five, get the sixth one free" sale. However, there is no additional happiness from that sixth ticket because they only need five tickets. If, however, they had a friend or relative they wanted to take with them, the sixth ticket would have positive marginal utility.
  • A person may win two airline tickets, but if he or she does not have someone to travel with to that particular destination on those particular dates, there is no additional satisfaction to having that second ticket.

Positive Marginal Utility

  • Unlike newspaper machines, soda machines are designed to only dispense one soda at a time. This is because additional satisfaction can be gained from drinking more than one soda.
  • One haircut at a salon costs $40. However, customers can pay up front for five haircuts, totaling $200, and receive a coupon for a sixth cut free. If a person would eventually purchase six cuts, there can be great satisfaction in paying for the greater number of cuts up front because the cost of each hair cut is reduced in the end.

Negative Marginal Utility

  • Antibiotics in the right dosage can kill harmful bacteria in a person's body. However, taking more antibiotics does not necessarily mean getting better faster or to a better extent. Taking more than necessary may not be useful, and could eventually harm a person's body.
  • Taking more vitamins than necessary does not actually give a person's body more of that particular vitamin; rather, the excess than cannot be absorbed by the body are passed out of the person's system.
  • Using more shampoo than necessary does not make a person's hair cleaner; the excess shampoo is simply washed away and wasted.
  • Lathering sunscreen on more often than recommended does not necessarily give you better protection from the sun; it may be wasted.
  • If a person is thirsty, he or she will find satisfaction in drinking water. However, after a certain point, the person is hydrated, and it can be harmful to drink too much water past that point.
  • Cheerios boxes cost $5, but if you buy 100 boxes, the price drops to $3 per box. However, if you cannot eat 100 boxes before they expire, there is less satisfaction in having so many boxes.

Increasing Marginal Utility

  • When building a stool, the first two legs appear to have little value because the stool cannot stand. However, there is great value placed on the third leg, because it is needed for the stool to stand up.
  • There is greater satisfaction in finding the 52nd card of a deck of cards than in finding the first 51, because it completes the deck.
  • There is greater satisfaction in finding the second shoe than there was in finding the first, since the second shoe gives you a complete pair of shoes.

    Diminishing Marginal Utility

    • Consuming one candy bar may satisfy a person's sweet tooth. If a second candy bar is consumed, the satisfaction of eating that second bar will be less than the satisfaction gained from eating the first. If a third is eaten, the satisfaction will be even less.
    • After holding your breath under water, coming up for air and taking that first breath feels wonderful. The second breath may bring satisfaction as well, but the satisfaction will decrease as more breaths are taken.

    These examples illustrate the concept of marginal utility and show that one more may, or may not, be better.

Man buying a newspaper as marginal utility examples