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.

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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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RELATED FAQS
  1. How does a company make a spending decision using marginal analysis?

    A company can make a spending decision using marginal analysis by reviewing the effects of its marginal costs and marginal ... Read Full Answer >>
  2. What is the difference between marginal benefit and marginal revenue?

    Marginal benefit measures the consumer's benefit of consuming an additional unit of a good or service, while marginal revenue ... Read Full Answer >>
  3. How can I use marginal benefit analysis to help my business strategy?

    It is possible for a company to use marginal benefit analysis in decision making by understanding how that decision changes ... Read Full Answer >>
  4. What are some examples of diminishing marginal benefits in my personal spending?

    A consumer would experience diminishing marginal benefits when he decides to consume more than one unit of a good or service ... Read Full Answer >>
  5. What is the difference between marginal benefit and marginal cost?

    Marginal benefit is the incremental increase in a benefit to a consumer caused by the consumption of an additional unit of ... Read Full Answer >>
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