What is a Dollar’s Worth?

Is it Useful?

     Actually, a dollar’s value depends on what it buys. Marginal utility is a fancy economic term to describe the amount of value a person derives from spending on a product or service. It is another piece of the puzzle that helps us evaluate and gauge the basis for a living wage.

Making choices

     Take a look at these pictures and decide which is most important for every individual’s well being:

Choice A

Courtesy of Google Images

Courtesy of Google Images

                                    Food versus Yacht  

Choice B

Courtesy of Google. Images

Courtesy of Google Images

          Clothing versus Jewelry

Choice C

Courtesy of Google Images

Courtesy of Google Images

                      House versus Plane

Smart Shoppers

     Those living on a minimum or living wage are smart when it comes to marginal utility. They intuitively know that dollars spent on food, clothing and shelter will provide a bigger bang for their buck. Whereas, the benefit they could derive from a yacht, jewelry or a private plane is just less obvious.

     Saying it another way, minimum wage earners see that dollars spent on food, clothing and shelter have more utility. In essence, they extract more marginal utility from every dollar spent on the basics.

Getting their money’s worth

     As a group, people earning a minimum or living wage derive among the highest marginal utility rates. Dollars spent by this group are in effect worth more.