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Introduction
What Is Utility And The Law Of Diminishing Marginal Utility? Utility refers to the satisfaction or pleasure that a person derives from consuming a good or service. It is a fundamental concept in economics that helps explain why people make certain choices when faced with limited resources. The law of diminishing marginal utility is an important principle that describes how the additional utility a person gains from consuming an extra unit of a good or service decreases as they consume more of it. This law is based on the idea that as a person consumes more of a particular good or service, the marginal utility derived from each additional unit diminishes. In other words, the more of something you have, the less you will value each additional unit. This concept is crucial to understanding consumer behavior and has important implications for the way goods and services are produced and consumed in modern economies.
What Is The Difference Between Utility And Diminishing Marginal Utility?
Utility and diminishing marginal utility are related but distinct concepts in economics.
Utility is the satisfaction or pleasure that a person derives from consuming a good or service. It is a subjective measure and differs from person to person. For example, a glass of water may have high utility to a person who is thirsty, but a low utility to a person who is not.
Diminishing marginal utility, on the other hand, is the principle that as a person consumes more of a particular good or service, the additional utility they derive from each additional unit decreases. In other words, the more of something a person has, the less they value each additional unit. For example, the first slice of pizza a person eats may have high utility, but the fifth slice may have much lower utility because the person is already satisfied and the additional slice may not bring as much enjoyment.
Utility refers to the satisfaction or pleasure a person derives from consuming a good or service while diminishing marginal utility is the principle that the additional utility a person derives from each additional unit of a good or service decreases as they consume more of it.
What Is The Difference Between Utility And Marginal Utility?
Utility refers to the overall satisfaction or benefits that a person receives from consuming a good or service. It is a measure of the total value that a person places on the consumption of a particular item.
Marginal utility, on the other hand, refers to the additional satisfaction or benefit that a person gains from consuming one more unit of a good or service. It is the change in total utility that results from consuming an additional unit of the good or service.
In other words, utility is a broad concept that measures the overall value or satisfaction that a person derives from consuming a good or service, while marginal utility is a specific concept that measures the change in value or satisfaction that results from consuming one additional unit of the good or service.
Understanding the concept of marginal utility is important for producers and consumers alike, as it helps to explain how people make choices about what to consume and how much to produce. The law of diminishing marginal utility, which states that as a person consumes more of a good or service, the additional satisfaction they derive from each unit will decrease, is a key principle in economics that helps to explain many consumer behaviors.
Define Marginal Utility State The Law Of Diminishing Marginal Utility
Marginal utility refers to the additional satisfaction or benefits that a person derives from consuming an extra unit of a good or service. In other words, it is the change in total utility resulting from a one-unit increase in the consumption of a particular good or service.
The law of diminishing marginal utility states that as a person consumes more of a particular good or service, the additional utility or satisfaction they derive from each additional unit decreases. In other words, the more of something a person has, the less they will value each additional unit of it. This law is based on the idea that as a person consumes more of a particular good or service, they will eventually reach a point where the additional units consumed provide less and less marginal utility.
For example, the first slice of pizza a person eats may have high marginal utility, but the fifth slice may have much lower marginal utility because the person is already satisfied and the additional slice may not bring as much enjoyment. This principle is important in understanding consumer behavior, as it helps to explain why people allocate their resources in certain ways when faced with limited options.
Law Of Diminishing Marginal Utility Formula
The law of diminishing marginal utility does not have a specific mathematical formula. However, the concept can be expressed in a general formula that relates the change in total utility (TU) to the change in the number of goods consumed (Q):
MU = ΔTU / ΔQ
Where MU is the marginal utility or the additional satisfaction obtained from consuming an extra unit of the good or service, ΔTU is the change in total utility resulting from the consumption of an additional unit of the good or service, and ΔQ is the change in the quantity of the good or service consumed.
The law of diminishing marginal utility suggests that as the quantity consumed increases, the marginal utility of each additional unit consumed will eventually decrease. This means that the change in total utility (ΔTU) resulting from the consumption of each additional unit of the good or service will become smaller and smaller as the quantity consumed (Q) increases.
Difference Between The Law Of Diminishing Marginal Utility And The Law Of Equi-Marginal Utility
The law of diminishing marginal utility and the law of equi-marginal utility are two important principles in economics, but they are different in several ways.
The law of diminishing marginal utility states that as a person consumes more of a particular good or service, the additional utility or satisfaction they derive from each additional unit decreases. In other words, the more of something a person has, the less they will value each additional unit of it.
On the other hand, the law of equi-marginal utility states that a rational consumer will allocate their budget among different goods and services in such a way that the marginal utility per unit of money spent is equal for each good or service. In other words, a consumer will spend their money in a way that maximizes their total utility or satisfaction, subject to their budget constraint.
While the law of diminishing marginal utility focuses on the relationship between the quantity consumed and the marginal utility derived from each unit, the law of equi-marginal utility focuses on the allocation of resources or budget among different goods or services to maximize total utility. The former describes how the marginal utility of a good or service decreases as more of it is consumed, while the latter describes how a consumer will allocate their limited resources in a way that maximizes overall satisfaction.
Explain The Law Of Diminishing Marginal Utility With The Help Of A Utility Schedule And Diagram
The law of diminishing marginal utility states that as a person consumes more and more of a good or service, the additional satisfaction or utility they derive from each additional unit of the good or service will eventually decrease. This can be explained with the help of a utility schedule and diagram.
A utility schedule is a table that shows the total utility and marginal utility that a person derives from consuming various quantities of a good or service. For example, consider the following utility schedule for cups of coffee
| Cups of Coffee | Total Utility | Marginal Utility |
| 1 | 10 | 10 |
| 2 | 18 | 8 |
| 3 | 24 | 6 |
| 4 | 28 | 4 |
| 5 | 30 | 2 |
| 6 | 30 | 0 |
In this utility schedule, we can see that the first cup of coffee provides 10 units of total utility and 10 units of marginal utility. As the person consumes more cups of coffee, the total utility increases, but the marginal utility decreases. By the time the person consumes the sixth cup of coffee, the total utility does not increase at all, and the marginal utility is zero.
This relationship between total utility and marginal utility can be graphically represented in a diagram called a marginal utility curve. In the case of the coffee example, the marginal utility curve would be downward-sloping, indicating that the marginal utility of each additional cup of coffee decreases as the person consumes more cups.
In the graph, the horizontal axis represents the quantity consumed, and the vertical axis represents the marginal utility. The curve starts at the maximum point and slopes downwards, showing the decrease in the additional utility that a person derives from consuming additional units of the good or service.
The law of diminishing marginal utility is an important concept in economics that helps to explain how the value of a good or service changes as more and more of it is consumed, and how consumers allocate their resources to maximize their satisfaction.
Conclusion
Utility refers to the level of satisfaction or usefulness that a person derives from consuming a good or service, and it is an important concept in economics. The law of diminishing marginal utility is a principle that describes the decreasing marginal utility that a consumer derives from consuming additional units of a good or service. The concept of diminishing marginal utility plays a crucial role in understanding consumer behavior, as it helps explain why consumers may choose to consume less of a good or service as its price increases, and why they may experience diminishing returns as they consume more of it. By understanding the law of diminishing marginal utility, economists and businesses can gain insights into consumer behavior, which can help them make better decisions regarding the prices, production, and marketing of goods and services.
