Marginal Utility
The additional satisfaction or benefit a consumer derives from consuming one more unit of a good or service.
What is Marginal Utility?
Marginal utility is the change in total utility (satisfaction) gained by consuming one additional unit of a good or service. The law of diminishing marginal utility states that as a person consumes successive units of the same good, the additional satisfaction from each unit declines. The first slice of pizza provides substantial satisfaction; the fifth provides much less. This principle underlies the downward-sloping demand curve: consumers are willing to pay less for additional units as the utility of each unit falls. Marginal utility analysis also explains consumer equilibrium — a rational consumer allocates their budget so that the marginal utility per dollar spent is equal across all goods purchased. The concept was central to the marginalist revolution in economics in the 1870s (Jevons, Menger, Walras) and remains foundational to microeconomic theory, behavioral economics, and welfare analysis.
Example
A commuter is stranded at an airport with no food. The marginal utility of the first bottle of water is extremely high (preventing dehydration). The second bottle provides some satisfaction (comfortable reserve). By the fourth bottle, marginal utility is near zero since the commuter has no reasonable use for more water. This diminishing utility explains why a vending machine can charge $5 for the first water bottle in a shortage, but not for the fourth.
Source: Investopedia — Marginal Utility