Diminishing marginal utility and the teaching of economics: A note

Todorova, Tamara (2021): Diminishing marginal utility and the teaching of economics: A note.

Abstract

This paper discusses how utility can be taught in undergraduate courses in microeconomics so that to illustrate total and marginal utility, the law of diminishing marginal utility, and consumer rationality. Diminishing marginal utility is essential in describing rational consumer behavior, overconsumption, and oversaturation to students of economics. We demonstrate a quadratic and a logarithmic total utility with the subsequent forms and shapes of marginal utility. From what it seems there is no contradiction between diminishing marginal utility in the univariate context of consuming one good and the indifference curve as the multivariate case of two goods consumed.

• Item Type: MPRA Paper
• Language: English
• Keywords: total utility; marginal utility; indifference curve
• Subjects: A - General Economics and Teaching > A2 - Economic Education and Teaching of Economics; A - General Economics and Teaching > A2 - Economic Education and Teaching of Economics > A22 - Undergraduate; B - History of Economic Thought, Methodology, and Heterodox Approaches > B4 - Economic Methodology > B41 - Economic Methodology; D - Microeconomics > D1 - Household Behavior and Family Economics > D11 - Consumer Economics: Theory

References

Dittmer, T. (2005). Diminishing marginal utility in economics textbooks. Journal of Economic Education, 36(4), 391-399.

Gossen, H. (1854). The Laws of Human Relations and the Rules of Human Action Derived Therefrom. (1983). Cambridge, MA: MIT Press.

Lin, C-C, & Peng, S-S. (2019). The role of diminishing marginal utility in the ordinal and cardinal utility theories. Australian Economic Papers, 58, 233-246. https://doi.org/10.1111/1467-8454.12151.

Marshall, A. (1920). Principles of Economics: An Introductory Volume. London, New York: Macmillan for the Royal Economic Society.

Marshall, A. (1961). Principles of Economics. Variorum, Edited by Guillebaud, C. London: Macmillan.

Silbeberg, E. (1990). The Structure of Economics: A Mathematical Analysis. 2nd ed., New York: McGraw-Hill.

Smith, A. (1776). An Inquiry into the Nature and Causes of the Wealth of Nations. Cannan, E. ed. Chicago: The University of Chicago Press.

Steiner, P. (2011). The creator, human conduct and the maximization of utility in Gossen’s economic theory. European Journal of the History of Economic Thought, 18(3), 353-379.

Van Daal, J. (1995). Gossen as an evolutionary thinker (Gossen comme un penseur évolutionniste). Revue d’économie Politique, 105(5), 859-869.

Von Neumann, J. & Morgenstern, O. (1944). Theory of Games and Economic Behavior. Princeton, NJ: Princeton University Press.