Diminishing marginal utility
Diminishing marginal utility is an economic concept that states as a person increases consumption of a product, the satisfaction or utility derived from each additional unit of the product decreases. In other words, the more you consume of a product, the less value you place on each additional unit.
For example, imagine you are really hungry and you eat your first slice of pizza. The first slice brings you a lot of satisfaction because you were hungry. However, as you continue to eat more slices, the satisfaction you get from each additional slice decreases. Eventually, you may even feel sick from eating too much pizza.
This concept is important in economics because it helps explain why people make certain choices when it comes to consumption. For example, a person may choose to buy one luxury item instead of multiple because the additional utility they would get from each additional item decreases.
Overall, diminishing marginal utility helps economists understand how people make decisions about consumption and how they allocate their resources.
Examples of diminishing marginal utility:
- Eating ice cream – the first scoop tastes amazing, but by the fourth scoop, you may not enjoy it as much.
- Buying shoes – the first pair brings excitement, but after several more pairs, the thrill may diminish.
For more information on diminishing marginal utility, you can visit Wikipedia.