What is the Law of Diminishing Marginal Utility?
The Law of Diminishing Marginal Utility is an economic principle that states that as a person increases consumption of a product, there is a decline in the marginal utility that person derives from consuming an additional unit of that product. This means that the value or usefulness that a consumer gets out of an additional unit of a good or service is less than the value they get out of the previous unit.
Examples of the Law of Diminishing Marginal Utility
The Law of Diminishing Marginal Utility can be seen in everyday life. For example, after eating a meal, each additional bite of food provides less satisfaction than the bite before it. Similarly, the enjoyment of a movie decreases with each additional viewing. Another example is a consumer’s demand for a product over time. As a consumer’s consumption of a product increases, their satisfaction from consuming an additional unit of the product decreases. This can be seen in the demand for luxury goods. Initially, when a consumer purchases a luxury item, they may experience a great deal of satisfaction. However, if they continue to purchase the same item, the satisfaction they receive from it will eventually decrease.
Conclusion
The Law of Diminishing Marginal Utility is an important economic principle that states that as a person increases consumption of a product, there is a decline in the marginal utility they receive from consuming an additional unit of that product. This law has been observed in everyday situations such as food consumption and movie viewing, as well as in the demand for luxury goods. For further reading: https://www.investopedia.com/terms/l/lawofdiminishingmarginalutility.asp https://www.economicsdiscussion.net/law-of-diminishing-marginal-utility/law-of-diminishing-marginal-utility/9188