Marginal Utility
Also called: diminishing marginal utility, utility
Marginal utility is the extra satisfaction from one more unit of something, and it almost always falls as you consume more. The first slice of pizza beats the fifth. Diminishing marginal utility of wealth is the formal reason risk aversion exists: losing $10,000 hurts more than gaining $10,000 pleases, which makes insurance rational and makes a fair coin flip on your net worth a bad bet.
Want more than a definition? Learn it in Macro & Markets →