Understanding Diminishing Marginal Utility
Diminishing marginal utility is an economic concept that refers to the decline in the marginal utility of a product or service as the consumption of it increases. In other words, the more you have of something, the less satisfaction it brings you. This concept helps to explain why people often make irrational decisions in the face of unlimited resources.
What is Marginal Utility?
Marginal utility is the change in satisfaction or utility that a consumer gets from consuming one extra unit of a good or service. It is a way of measuring the value of a good or service to a consumer. While the utility of a good or service may increase as it is consumed, at some point the utility starts to decline. This is known as diminishing marginal utility.
Examples of Diminishing Marginal Utility
1. Eating: If you eat a slice of pizza, you may enjoy it. But if you eat five slices, you will likely experience diminishing marginal utility as the pleasure of each additional slice decreases. 2. Shopping: Shopping for a new outfit can be exciting. But as you purchase more and more items, the pleasure of buying each additional item starts to decline. 3. Movies: Watching a movie can be enjoyable. But if you watch the same movie multiple times, the pleasure of watching it will start to diminish with each additional viewing.
Conclusion
Diminishing marginal utility is an important concept in economics. It helps to explain why people often make irrational decisions in the face of unlimited resources. By understanding this concept, consumers can make better decisions and maximize their utility.
References
https://www.investopedia.com/terms/d/diminishing-marginal-utility.asp https://www.investopedia.com/terms/m/marginalutility.asp https://www.economicshelp.org/microessays/demand/diminishing-marginal-utility/