Utility and consumer choice
Utility and consumer choice: build the core model, apply it to evidence and qualify conclusions where outcomes depend on context.
9708 section 7.1; A Level. Checked against Cambridge's 2026–2028 Version 2 (latest version published December 2025) and 2029 Version 1 (published September 2026). Cambridge states that neither version has significant changes affecting teaching. Always follow the syllabus for the candidate's examination year.
Before you begin
Work on paper. Try each question before revealing help, and explain why your method works.
Quick readiness check
How is marginal utility calculated?
What you will learn
- Calculate total and marginal utility
- Explain diminishing marginal utility
- Apply the equi-marginal principle
- Derive an individual demand curve
- Evaluate rational-choice assumptions
Core model and terms
Utility is the satisfaction a consumer derives from consumption. Total utility is the sum of utility from all units; marginal utility is the change in total utility from one additional unit. Diminishing marginal utility means each extra unit adds less utility, other things equal. A consumer choosing across goods is at an interior optimum when marginal utility per unit of expenditure is equal across goods.
Apply and evaluate
If price rises while marginal utility from each quantity is unchanged, the consumer may choose fewer units; this helps derive a downward-sloping individual demand curve. The model clarifies a choice but assumes utility can be compared, information and preferences are stable, and decisions are rational. Habit, limited attention, social influences and changing circumstances can weaken those assumptions.
Pause and explain
Which statement best applies utility and consumer choice?
Worked example
A consumer’s total utility from 1, 2 and 3 meals is 12, 20 and 25 utils. Find the marginal utility of the second and third meals.
Show the worked solution
- Second-meal MU = 20 − 12 = 8
- Third-meal MU = 25 − 20 = 5
- Marginal utility is diminishing across these units
Answer Second-meal MU = 20 − 12 = 8 → Third-meal MU = 25 − 20 = 5 → Marginal utility is diminishing across these units
Try a topic test
Choose Easy, Normal or Difficult. Save your answers and open worked review after finishing.
Test this topic →From guided practice to a new situation
Write your answer and reasoning first. Use a hint only if you are stuck. The model solution is for self-checking; your written work is not automatically marked.
A consumer’s total utility from 1, 2 and 3 meals is 12, 20 and 25 utils. Find the marginal utility of the second and third meals.
Give me a hint
Subtract the previous total utility from each new total.
Compare my reasoning
- Second-meal MU = 20 − 12 = 8
- Third-meal MU = 25 − 20 = 5
- Marginal utility is diminishing across these units
Second-meal MU = 20 − 12 = 8 Third-meal MU = 25 − 20 = 5 Marginal utility is diminishing across these units
Look for these in your work
- Second-meal MU = 20 − 12 = 8
- Third-meal MU = 25 − 20 = 5
- Marginal utility is diminishing across these units
Good A gives 18 utils per dollar and Good B gives 12. What does the equi-marginal principle suggest if the consumer can reallocate spending?
Give me a hint
Compare marginal utility per dollar, not total utility.
Compare my reasoning
- The last dollar on A yields more utility
- Shift some spending toward A and away from B
- Continue until marginal utility per dollar is equal or a constraint binds
The last dollar on A yields more utility Shift some spending toward A and away from B Continue until marginal utility per dollar is equal or a constraint binds
Look for these in your work
- The last dollar on A yields more utility
- Shift some spending toward A and away from B
- Continue until marginal utility per dollar is equal or a constraint binds
A consumer’s marginal utility from coffee falls as more cups are consumed. Explain how a lower price can increase the chosen quantity.
Give me a hint
Compare marginal utility with the lower cost of each additional cup.
Compare my reasoning
- Each additional cup adds less utility
- A lower price reduces the utility sacrificed per dollar
- More cups may satisfy the choice condition
Each additional cup adds less utility A lower price reduces the utility sacrificed per dollar More cups may satisfy the choice condition
Look for these in your work
- Each additional cup adds less utility
- A lower price reduces the utility sacrificed per dollar
- More cups may satisfy the choice condition
A student chooses a snack using habit and a social-media trend rather than comparing all prices. Which model assumption is weakened?
Give me a hint
Identify the assumption about consistent, informed choice.
Compare my reasoning
- The decision uses a habit and social influence
- It may not reflect full information or stable independent preferences
- Rational-choice utility predictions become less reliable
The decision uses a habit and social influence It may not reflect full information or stable independent preferences Rational-choice utility predictions become less reliable
Look for these in your work
- The decision uses a habit and social influence
- It may not reflect full information or stable independent preferences
- Rational-choice utility predictions become less reliable
Common mistakes
- Confusing total with marginal utility or treating rational-choice assumptions as a description of every real decision.
What can you explain now?
How is marginal utility calculated?
Compare with the explanation
The change in total utility from one additional unit
It measures the extra satisfaction from the next unit consumed.
After trying it yourself, choose your next review. This is your self-assessment.
Your review choice appears on Today. Sign in to sync it across devices.
Make it stick
Before moving on, explain the central idea in utility and consumer choice and state one condition that could change its effect.
If you needed the solution, close it and solve the problem again from a blank page. A correct answer is stronger when you can explain the reason for each step.