Diminishing Marginal Utility

• Principle of diminishing marginal utility - The more of a good that one obtains in a specific period of time, the less the additional utility derived from an additional unit of the good.

• Utility diminishes over time - The shorter the time period ,the more quickly marginal utility diminishes.

• Consumers are not identical - The rate at which marginal utility diminishes depends on individual tasks and preferences, and so differs across consumers.

• As the use of an Input increases, a point will eventually be reached at which the resulting additions to output decreases.

There are three stages of diminishing marginal utility-

Stage 1 -Total Product and average product increases ,Marginal Product first increases and then decreases.

Stage 2 - Total product increases , average product and marginal product both decreases.

Stage 3 -Total Product diminishes ,Average product decreases and marginal product becomes negative.