Microeconomics Question from Walter E. Williams:[]

The concept of marginal utility is subject to the objection that it implies a numerical measurement of total utility. How can we overcome this difficulty? Translate into terms which do not involve the cardinal measurement of utility:

  • (a) The law of diminishing marginal utility.
  • (b) The Pareto optimality condition that the ratio of the marginal utilities of two goods must equal for all individuals in a free-exchange economy.


  • (a) Each additional unit of a good is preferred less than the previous unit, as measured by the amount of another goods the individual is willing to give up to obtain it.
  • (b) Pareto Optimality requires that MUx/MUy is equal for all individuals – hence every individual’s allocation is such that an additional unit of x is worth less than its cost in terms of y, and visa versa.

Other Questions:[]

Next: WEW-003
Previous: WEW-001

WEW Questions First 20