Thus the marginal utility of that basic quantity of water is extremely high (Drexel, 2002). More than this bare minimum will be consumed, but the marginal utility of successive glasses of water drunk over a period of time will decline steadily (Drexel 2002). With the consumption of each glass, total utility rises, but marginal utility declines as consumption increases (Drexel 2002).
Maximising Utility.
A basic assumption of the theory of consumer behaviour is that consumers try to make themselves as well off as they possibly can in the circumstances in which they find themselves (Nelson and Stackhouse, 2001:214). In other words, the members of a household seek to maximise their total utility, given their constraints of available income and time. A consumer who is maximising utility will allocate expenditures so that the utility obtained from the last unit of currency on each product is equal (Nelson and Stackhouse, 2001:214). Consumers adjust expenditure so as to maximise total utility such that the marginal utility of each product is the same - that is, such that the last unit of each product consumed is valued equally (Nelson and Stackhouse, 2001:214).
Consider a consumer buying two goods, X and Y and priced at PX and PY respectively. If PX were three times greater than PY it would represent poor use of money if the marginal utility of the two goods were equal (Nelson and Stackhouse, 2001:215). The consumer would be spending three times more on product X to get equal utility to what could have been acquired by spending three times less on product Y (Nelson and Stackhouse, 2001:215). Imagine that for the consumer the utility of the last unit of currency spent on product X yields three times the utility of the last unit of currency spent on product Y (Nelson and Stackhouse, 2001:215). In this case, the consumer can increase total utility by switching a unit of currency from product Y to product X and by gaining the difference between the utilities of a unit of currency spent on each (Nelson and Stackhouse, 2001:215).
