Law of Diminishing Marginal Utility
The Law of Diminishing Marginal Utility is a fundamental concept in economics that explains
how the additional satisfaction (utility) gained from consuming one more unit of a good
decreases as more of the good is consumed.
Definition
As a consumer consumes more units of a good or service, the additional satisfaction derived
from each successive unit decreases, assuming all other factors remain constant.
Key Points
1. Utility: The satisfaction or pleasure derived from consuming a good or service.
2. Total Utility (TU): The total satisfaction obtained from consuming all units of a good.
3. Marginal Utility (MU): The additional utility gained from consuming one more unit of a
good.
Example
Imagine eating slices of pizza:
● The first slice gives you a lot of satisfaction.
● The second slice is enjoyable but less satisfying than the first.
● By the third or fourth slice, the additional enjoyment might be minimal or even negative
(you might feel full or uncomfortable).
This decrease in satisfaction with each additional slice illustrates the law of diminishing marginal
utility.
