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Marginal Social Benefit (MSB)

Definition

Marginal Social Benefit refers to the additional benefit society receives from consuming one more unit of a good or service. It takes into account both the private benefit to individuals and any external benefits that accrue to society as a whole.

Analogy

Imagine you and your friends are having a pizza party. The first slice of pizza brings joy and satisfaction to everyone, but as more slices are consumed, the happiness starts to diminish. Marginal Social Benefit is like measuring how much extra happiness each additional slice brings to the entire group.

Related terms

Private Benefit: The individual benefit or utility gained by consuming a good or service.

External Benefits: Positive effects experienced by third parties not directly involved in the consumption or production of a good or service.

Marginal Cost: The additional cost incurred from producing one more unit of a good or service.