Diminishing Marginal Utility, Essay Example

Diminishing marginal utility is basic law of economics in which entails that as consumption increases of a certain product, but other products remain constant, there will be a decline in the marginal utility that is derived from each additional unit that is consumed of that product. (Investopedia 1) Usually used in reference to determining price, marginal utility can refer to a consumption of a service or good. As Investopedia points out. “The less of something you have, the more satisfaction you gain from each additional unit you consume; the marginal utility you gain from that product is therefore higher, giving you a higher willingness to pay more for it. (Heakal 1) Based on this definition, marginal utility is used to describe to the amount of utility or satisfaction that is gained from consumption.

In looking at the law, when marginal utility or additional satisfaction consumed decreases. This can be explained when you are really craving some ice cream, one you eat a bowl of ice cream your craving has been satisfied. The total utility or the marginal utility will be high when eating your bowl of ice cream. However, if you choose to eat another bowl of ice cream, the satisfaction or pleasure of each new bowl will be less than the bowl of ice cream before. This could be due because you are overeating and getting full, or because you are no longer craving ice cream. This explains why, when I try to eat another bowl of ice cream I no longer am satisfied, partly because it is too much sugar, but also the pleasure of satisfying my craving of one bowl of ice cream.

Works Cited

Heakal, Reem. “Economics Basics: Utility.” Investopedia. N.d. Web. 26 January 2015. http://www.investopedia.com/university/economics/economics5.asp

“Law of Diminishing Marginal Utility.” Investopedia. N.d. Web. 26 January 2015. http://www.investopedia.com/terms/l/lawofdiminishingutility.asp