Marginal Benefit

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DEFINITION of 'Marginal Benefit'

The additional satisfaction or utility that a person receives from consuming an additional unit of a good or service. A person's marginal benefit is the maximum amount they are willing to pay to consume that additional unit of a good or service. In a normal situation, the marginal benefit will decrease as consumption increases.

BREAKING DOWN 'Marginal Benefit'

For example, assume there is a consumer wishing to purchase an additional burger. If this consumer is willing to pay $10 for that additional burger, then the marginal benefit of consuming that burger is $10. The more burgers the consumer has, the less he or she will want to pay for the next one. This is because the benefit decreases as the quantity consumed increases.

It is important to note that even though the consumer is willing to pay $10 for the burger,this will not necessarily be the burger's price; this is determined by market forces. The difference between the market price and the price the consumer is willing to pay is called consumer surplus.

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