Utility and Demand
Dear Dr. Homoeconomicus:
In Microeconomics we've been getting into this seriously abstract theoretical stuff
and I've been wondering about this marginal utility thing, total utility thing, and what in
tarnation they have to do with one another, let alone with what they have to do with
Like, this demand concept is easy:
of course people buy more of something
when the price is low than when the price is high because they can, like duh!
does this utility thing have to do with it?
The objective of economics is to explain
people purchase more of something
when the price is low than when it is high.
To perceive is easy, to understand -- explain a
process using reason-- is more difficult.
Indeed, this is what separtes humans from
The essentiality of this distinction may be illuminated by a short story.
In 1870 the English economist Stanley Jevons, while reading
, found an article describing an instrument that could be used to measure utility, the
psychologists discovered an interesting property associated with consuming things:
discovered that, in general, the more we consume of something the more satisfaction we
For instance, after a long hard day of work in the coal mines near Sheffield, a person
becomes quite thirsty.
A cold beverage helps quench that thirst.
Multiple cold beverages
quench it even more.
The more cold beverages, the more quenching, and so on.
psychologists were very excited about this discovery and immediately began to consider
how it might solve mysteries about the id, the ego, and how each might be expressed in
sexually oriented dream sequences.
Now Jevons wasn't concerned with the psychological
applications, especially the latter as he was an economist (economists do it with tables of
numbers, equations and graphs), i.e, they are human unlike.
Rather, he wanted to
resolve the diamond-water paradox and become totally famous.
So, he purchased a
utilimeter (mail ordered to avoid an 8% sales tax) and began experimenting.
attach the utilimeter to his microeconomics' students, then gorge them with tea and
crumpets (Brits have a clear disdain for beer and brats).
In the process he made a startling
while each additional unit of tea and crumpets