Zero marginal utility is what happens when consuming more of an item does not provide an additional measure of satisfaction . For example, you might feel quite full after two slices of lemon pie, and not really feel better after having a third slice. In this case, your marginal utility from eating pie is zero.
What is the consumer’s equilibrium point?
The consumer’s equilibrium point occurs when a person finds the greatest possible utility and satisfaction from a good given his or her income or budget. That is, the consumer should spend his or her limited budget on the goods that give him or her the greatest marginal utility per dollar.
As you may have already inferred, the consumer’s equilibrium point will depend on the individual’s budget constraint and the price of the products/services .
Therefore, only when the ratio MU
÷ P is equal for all goods, the consumer maximizes his total utility.
Consumer theory believes that there is a tendency for all goods and services to reach a marginal unit of zero. When this happens, the consumer no longer dataset needs the product and stops consuming it.
3 examples of consumer equilibrium
Consumer theory is quite extensive and complex. To help you better understand the concept of marginal utility and break-even point, we have created three fictional scenarios to illustrate its application. Let’s go!
Example of positive marginal utility
Maria goes to the market and buys two bars of chocolate. Knowing that some friends will be visiting her that day, she decides to buy four more bars. Since instagram’s billion dollar creator program she does not need to go back to the market to make a new purchase and her budget covers the additional items, marginal utility is positive in this case.
Negative marginal utility example
Lupe is diabetic and can eat a limited be numbers amount of candy per day. If she buys more than one chocolate bar at the market and consumes it, she may become ill. In this case, the additional items do not provide more satisfaction, but rather a risk or problem. In this case, marginal utility is negative.