Marginal Utility per Dollar (MU/P)
Definition
Marginal utility per dollar represents how much additional satisfaction can be obtained from spending one more dollar on a particular good or service.
Analogy
Think about going to a buffet. The marginal utility per dollar is the satisfaction you get from each additional dollar spent on food. If you find a dish that gives you a lot of satisfaction for its price, it has high marginal utility per dollar.
Related terms
Consumer Equilibrium: Consumer equilibrium occurs when the marginal utility per dollar spent on each good or service is equal.
Income Effect: The income effect refers to the change in quantity demanded of a good due to a change in purchasing power resulting from a change in income.
Substitution Effect: The substitution effect describes how consumers may switch to alternative goods or services based on changes in relative prices.
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