Answer to Question #130169 in Microeconomics for olga

Question

what is the law of diminishing marginal utility? do all people consuming all goods exhibit this law? give some examples of possible exceptions to the law of diminishing marginal utility.

Answer 1

The law of diminishing marginal utility is a law in economics that states that all other factors remain constant. As the rate of consumption increases, the marginal utility that comes from each unit of addition decreases.

 

Explanation:

Marginal utility refers to an incremental increase in the utility that comes from consuming an additional unit. The law of diminishing marginal utility indicates that when a person consumes a product, the utility of satisfaction comes from the product wanes as they continue consuming more and more of the item.

For example, a person may buy a certain type of cookie; later on, they might buy fewer cookies, choose a different type, or buy chocolate instead. The initial satisfaction that was coming from the cookie is diminishing. Another good example is when a person purchases a slice of bread. After eating the first slice, they acquire a positive utility because they were hungry. Still, when they continue to eat, the other slices become satisfied since they have smaller benefits and enjoyment. As they take the other slices, the utility reduces, thus experiencing diminished marginal utility.

In economics, the marginal utility of a service or a good reduces as the supply increases. The law of diminishing marginal utility is a good phenomenon in economics. It shows that when a consumer goes to the market to purchase an item, they do not attach the same value to all the products they buy. They will spend more for some and less for others.