Diminishing Marginal Utility
What is Diminishing Marginal Utility?
Diminishing marginal utility is the concept that as a person consumes more of a particular good or service, the satisfaction or utility that they derive from consuming additional units of that good or service will decline. This is because people generally place a higher value on their first units of consumption and a lower value on subsequent units.
For example, if a person is very hungry, they might derive a lot of satisfaction from consuming their first slice of pizza. However, as they continue to eat more slices, the satisfaction they derive from each additional slice will decline. Eventually, they may reach a point where they are no longer hungry and do not derive any additional satisfaction from consuming more pizza.
Diminishing marginal utility is an important concept in economics and is often used to explain consumer behavior and to analyze the demand for goods and services. It is also a key factor in the determination of price, as people are generally willing to pay more for their first units of consumption and less for subsequent units.