Diminishing Marginal UtilityEdit

"The 'Law of Diminishing Marginal Utility' states that for any good or service, the marginal utility of that good or service decreases as the quantity of the good increases, ceteris paribus. In other words, total utility increases more and more slowly as the quantity consumed increases.

This is 'diminishing returns' from the viewpoint of the consumer, and is a general principle of economics. There might be a threshold before the principle applies. For example, the marginal utility of golf clubs might increase until you have a fairly full set. But beyond some threshold, marginal utility will diminish with increasing consumption of any good." [1]

Marginal Utility

Utility is a decreasing function of X: The marginal change is decreasing hence the name

  • A concept in Economics which explains how the satisfaction for any one good will decrease as more quantities are obtained.
  • Note the absence of a price on this graph. This is the utility from one good. A price would indicate trade-offs from other goods. Comparing the relative marginal utility of two goods allows insight into how economic choice is made.
Linear Demand

This concept is used to explain why the demand curve (for a given moment in time) will be downward sloping.


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