Technically, this feature does have marginal utility.
So this example's very special because everybody thinks that the good Y has constant marginal utility of 1.
But then little by little, starting with Irving Fisher and a bunch of people at the same time and a little bit later, so Hicks and Samuelson are famous for this, they began to wonder what kind of crazy utility functions are these where there's some mysterious good that has constant marginal utility of 1.
Maybe you can calibrate how many brain waves are spinning around and how happy somebody is, and maybe there's some mysterious good like food that has constant marginal utility". Well, that doesn't seem very persuasive to me and it wasn't to the economists of the beginning of the twentieth century.
An extra slice of bread offered to a family that has 30 slices, however, will have less marginal utility, since the difference between 30 and 31 is proportionally smaller and the family's hunger has been allayed by what it had already.
To the assumption that material resources have diminishing marginal utility, let us add the assumption that different people generally get roughly the same benefits from the same material resources.
So in fact the marginal revolution so Jevons, Menger, and Walras in 1871 all came up with the idea at the same time of diminishing margin utility, and they said if you have people who consume multiple amounts of every commodity but they have diminishing marginal utility they're going to behave very much the same way as this little example.
When consumption only takes place in the future and therefore the risk-free rate is exogenous, equal prices are obtained when agents have exponential utility with normal consumption or when they have linear marginal utility.
Just that they have diminishing marginal utility.
Consumption is also thought to have diminishing marginal utility, i.e. a poorer person will value an additional unit of consumption more than his richer cousin.
They all argued, starting with Irving Fisher, that it made no sense to think that we could actually measure utility, and more than that it made even less sense there'd be some good that had constant marginal utility of 1.
