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With ordinal utility, a person's preferences do not have a unique marginal utility, making the concept of diminishing marginal utility irrelevant. On the other hand, diminishing marginal utility is a significant concept in cardinal utility , which is used to analyse intertemporal choice , choice under uncertainty , and social welfare in modern ...
The theory of marginal utility, which is based on the subjective theory of value, says that the price at which an object trades in the market is determined neither by how much labor was exerted in its production nor on how useful it is on the whole. Rather, its price is determined by its marginal utility. The marginal utility of a good is ...
The marginal "dollar" cost of each unit of resources is equal to the marginal value productivity for each commodity. Bergson argued that welfare economics had described a standard of economic efficiency despite dispensing with interpersonally-comparable cardinal utility , the hypothesization of which may merely conceal value judgments, and ...
Since the subjective value holds that buyers use their own value judgements, the same goes for sellers, and thus the mechanism of production. Austrian economist Ludwig von Mises believes that production costs are determined by a seller's evaluations of their opportunity costs, or the sellers "marginal utility lost of having fewer of that good ...
Because the marginal rate of substitution of leisure for income is also the ratio of the marginal utility of leisure (MU L) to the marginal utility of income (MU Y), one can conclude: =, where Y is total income and the right side is the wage rate.
Economists distinguish between total utility and marginal utility. Total utility is the utility of an alternative, an entire consumption bundle or situation in life. The rate of change of utility from changing the quantity of one good consumed is termed the marginal utility of that good. Marginal utility therefore measures the slope of the ...
The aggregate production function () is a function of total effective labour force. A firm's labour demand is given by equating the cost of hiring an additional employee to the marginal product of labour. This cost consists of wages and future unemployment benefits.
If the value of a good is just what somebody is its marginal utility, then regarding some activities as value-creating and others not is a purely subjective matter; any activity which produces anything, or generates an income, could be considered production and productive, and the only question that remains is how productive it is.