We can use the opportunity-cost approach to convert the utility of burgers to dollar terms. This conversion is used in economics for cost-benefit analysis. Remember that (in our burgers-and-cokes example) the opportunity cost of a dollar spent on burgers is the marginal utility of cokes divided by the price of cokes. That's 10 units of utility, after Joe has bought one coke.
The equimarginal principle tells us that, to maximize utility, Joe will allocate his income so that
MUburgers/priceburgers = MUcokes/pricecokes
The right-had side is the opportunity cost, so we will substitute it in. We get:
And a little algebra, we get
And the price of burgers, on the left-hand side of that equation, is the maximum that the individual would pay for the first, second, third (and so on) burgers. It thus (also) gives us a measure of the utility of burgers in monetary terms; and in still other words, it tells us the total benefit of one, two, three, four or however many burgers.
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