The Basics
- Simple definition: As a person consumes more of a good, the additional satisfaction from each extra unit eventually decreases.
- Core idea: The first bite tastes best; each subsequent bite brings less pleasure.
- Think of it as: Too much of a good thing becomes less good.
What It Actually Means
This universal observation underlies downward-sloping demand curves. As consumption increases, marginal utility falls – sometimes eventually becoming negative (too much). It explains why we diversify consumption rather than consuming only one good. The rate of diminution varies across goods and individuals, but the principle holds generally.
Example
First hour studying economics – high marginal utility (learning a lot). Fifth hour low marginal utility (fatigue, diminishing returns). A thirsty person values the first glass of water enormously; the fourth glass much less.
Why It Matters
This law explains consumer behavior, pricing, and why variety matters. It’s fundamental to microeconomics and appears throughout consumer theory.
See also
Marginal Utility • Utility • Consumer Preferences • Diminishing Returns • Gossen’s Laws
Read more about this with MASEconomics: