Marginal utility of consumption

[archived_user]

From CFAI book Pg 385
[question removed by moderator]
Why would marginal utility of consumption rise with purchase?
Thanks

 

[archived_user]

I think you just misread the sentence, because it does not.
It says that you spend more on bonds and have therefore less of your budget left for consumption, i.e. you consume less. The marginal utility on consumption therefore increases (because you are consuming less). Likewise the marginal utility of an additional bond decreases (because you already own more).

 

[archived_user]

Marginal Utility - is it like the less you have it, the more you want it. And vice versa, the more you consume, the less you are satisfied with additional bite of consumption?

 

[archived_user]

Exactly. An illustrative example is imo food: if you are starving, the first bite will provide an enormous benefit. But if you are saturated, the same bite would provide a much fewer (but still positive) benefit.