An important law in economics is the “Law of Diminishing Marginal Utility”. Discuss what this law is and provide an example of diminishing marginal utility you’ve encountered recently
The term utility refers to an economic concept representing the total level of satisfaction an individual gets by consuming certain products or services. Utility experienced heavily influences a customer’s choices and preferences in the market. That is because people constantly aim to maximize utility. Marginal utility refers to the added satisfaction or utility an individual gets when he or she consumes one more unit of services or goods (Trifu, 2020). It can either be negative or positive marginal utility, depending on the experience. Marginal utility is positive if the client consumes much more units of a good based on the level of satisfaction he or she is receiving in the process. Nevertheless, if an individual experiences negative total utility, it directly reduces the consumed units since there is less satisfaction as more units get consumed.
Hence, the law of diminishing marginal unity explains a particular consumption phenomenon. When all other factors are kept constant, the consumer experiences a reducing economic utility as more products or services are consumed (Alvino, 2018). In simpler terms, when more of a product is consumed, satisfaction does not keep growing even when the same product is used. Thus, marginal utility declines, and the consumer is less willing to pay for more additional products or services. A recent example that I experienced was when I felt hungry and decided to buy a piece of queen cake. It was very satisfying having the first bite, and I enjoyed it. Nevertheless, by the time I ate the third queen cake, I was getting full and did not want to buy more. Concisely, this was a classic case of diminishing marginal utility as more goods were consumed.
Alvino, L., Constantinides, E., & Franco, M. (2018). Towards a better understanding of consumer behavior: marginal utility as a parameter in neuromarketing research. International Journal of Marketing Studies, 10(1), 90-106.
Trifu, A. (2020). The Marginal Diminishing Returns/Marginal Increasing Returns in The Pursuit of Happiness. Global Journal of Management and Business Research.