Now this is not a fancy picture of some remote abstraction called an “economic man.”  Allowing for the over-emphasis which is necessary to drive home the central point, it is a bald account of the aims and methods of the actual man of business.  To ascertain the margin of profitable expenditure in each direction, to go thus and no further, is the very essence of the business spirit, as the business man himself conceives it.  When he condemns the extravagance of Government departments, it is their lack of just this marginal sense that he chiefly has in mind.  “The lore of nicely calculated less or more” may be rejected by High Heaven and Whitehall, but no one can afford to despise it in the business world.

The transition from household to business expenditure involves an extended use of the word utility, which is worth noting.  Commodities like bread, sugar, or privately owned motor-cars are sometimes called “consumers’ goods” in contrast to “producers’ goods,” which comprise things such as raw materials, machinery, the services of typists and so forth, which are bought by business men for business purposes.  The line of division between the two classes is not a sharp one, and we need not trouble with fine-spun questions as to whether a particular commodity should in certain circumstances be included under the one head or the other.  But, broadly speaking, things of the former type yield a direct utility; they contribute directly to the satisfaction of our pleasures or our wants.  Things of the latter type yield rather an indirect utility.  Their utility to the business man who buys them lies in the assistance they give him in making something else from which he will derive a profit.  The utility of these things is therefore said to be derived from that of the consumers’ goods or services to which they ultimately contribute.  This conception of derived utility leads to certain complications which we shall have to notice later.

Sec.6. The Diminishing Utility of Money.  But one important point must be emphasized in this chapter.  The utility which a business man derives from the things which he buys for business purposes is the extra receipts which he obtains thereby.  Derived utility, in other words, is expressed in terms of money, and the idea of its relation to price presents no difficulty.  But the utility of things which are bought for personal consumption means the satisfaction which they yield, and this is clearly not a thing which is commensurable with money.  When, therefore, it is said that the prices measure their respective marginal utilities, what exactly is meant?  What was it that the argument of Sec.3 went to show?  That the utility of the marginal pound of sugar would seem to the housewife just worth the price that she must pay for it; in other words, that it would be roughly equal to the utility she could obtain by spending the money in other ways.  The respective marginal utilities which she obtains from the different