Law of diminishing marginal utility states that more a good one individual consumes in a specific period of time, the less the additional utility is derived from an additional unit of good.
This simply means the more you consume a good the less amount of satisfaction you will receive.
This varies from individual to individual as everyone has a different identity i.e diminishing factor depends on ones tastes and preferences. For example: there are two individuals. One who likes tea very much and another who likes it occasionally. Now the first person will have 3-4 cups and have same satisfaction while the other one will have all the satisfaction in his one cup. Satisfaction after these points will start to diminish as they will not feel it in the same way a they felt in the earlier cups.
Time also plays an important role in this law. If the individual consumes too much of good in a very short period of time the more quickly marginal utility will diminish. For example: if an individual given a single type of food day and night, the satisfaction derived after every meal will start to decrease very rapidly.
There are few exceptions to law of diminishing marginal utility as well. Hobbies of an individual are an exception. The more and more you pursue it the more satisfaction you achieve. Misers are exceptions as well. They try to derive maximum utility with every extra unit consumed. Valuable and rare goods are also not a part of this law.
This simply means the more you consume a good the less amount of satisfaction you will receive.
This varies from individual to individual as everyone has a different identity i.e diminishing factor depends on ones tastes and preferences. For example: there are two individuals. One who likes tea very much and another who likes it occasionally. Now the first person will have 3-4 cups and have same satisfaction while the other one will have all the satisfaction in his one cup. Satisfaction after these points will start to diminish as they will not feel it in the same way a they felt in the earlier cups.
Time also plays an important role in this law. If the individual consumes too much of good in a very short period of time the more quickly marginal utility will diminish. For example: if an individual given a single type of food day and night, the satisfaction derived after every meal will start to decrease very rapidly.
There are few exceptions to law of diminishing marginal utility as well. Hobbies of an individual are an exception. The more and more you pursue it the more satisfaction you achieve. Misers are exceptions as well. They try to derive maximum utility with every extra unit consumed. Valuable and rare goods are also not a part of this law.
No comments:
Post a Comment