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FIGURE 8.1 After I have had my first can of caffeinated pop in the morning, the
utility that I get from each additional can drops. Eventually, that utility drops to
almost nothing—that is, I'm not really getting anything out of it any more.
Each additional can does not mean the same as the one before it. The amount
of pop that each can adds (the value) is the same. Similarly, each additional can
provides me with utility. However, it is simply not as useful to me. The change in
utility from one can to the next is the marginal utility that I have for that next can.
V ALUE VS . U TILITY VS . M ARGINAL U TILITY
As we discussed earlier in Chapter 7, the notion of “value� is generally linked to
something concrete. However, “utility� is usually somewhat more ephemeral. Even
something as simple as a $20 bill has a somewhat amorphous utility. Its value is
based on the two and the zero emblazoned on it for all to see. Its utility can be more
of an “eye of the beholder� function, however. What makes marginal utility tick,
however, is that the beholder himself can change his perception of the exact same
value… much like me and my morning pop. As the perception of the value changes,
the utility changes. The change from one point to the next is the marginal utility.
For instance, a starving person on the street would find the $20 bill extraordi-
narily attractive, would covet it greatly, and do whatever he could to acquire and
protect it. That $20 bill has a large utility for this person. For that matter, a second
$20 bill would have a fairly large marginal utility as well—only slightly smaller than
 
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