Understanding Economic Utility and Marginal Utility
📌 Utility is defined as the capacity of a product to satisfy a customer's needs, often measured in Spanish units called utils.
🍰 Marginal utility is the *additional* satisfaction gained from consuming one more unit of an item (e.g., the first cupcake gave 10 utils, the second gave an additional 8 utils).
📊 A consumer consuming three cupcakes gained a total utility of 24 utils (10 + 8 + 6).

The Equi-Marginal Principle of Utility
⚖️ The equi-marginal principle (or principle of maximum satisfaction) guides rational consumers to substitute products to maximize total satisfaction within their budget.
💰 This principle is mathematically expressed by ensuring the ratio of marginal utility ($\text{MU}$) to price ($P$) is equal for all goods consumed: $$\frac{\text{MU}_A}{P_A} = \frac{\text{MU}_B}{P_B}$$
🍗 Example: Spending 210 pesos on half a kilo of chicken (90 pesos) and one kilo of fish (120 pesos) maximized satisfaction because both expenditures yielded the same ratio.
✔️ Chicken ratio: $6 \text{ utils} / 90 \text{ pesos} = 0.067$.
✔️ Fish ratio: $8 \text{ utils} / 120 \text{ pesos} = 0.067$.

Key Points & Insights
➡️ Maximize satisfaction by adjusting consumption so that the ratio of marginal utility to price is equal across all purchased goods.
➡️ Spending every peso efficiently across different items, as demonstrated by the equal ratios ($0.067$), is the key to achieving maximum total satisfaction under a budget constraint.
➡️ Consumers are considered rational when they actively substitute goods based on marginal utility gains relative to cost.

📸 Video summarized with SummaryTube.com on Oct 06, 2025, 06:41 UTC