Principle of Diminishing Marginal Utility

Principal of Diminishing Marginal Utility

The more of a good that one obtains in a specific period of time the less additional utility is derived from an additional unit of good. It is also the additional satisfaction that a customer gain after consuming one more unit of certain goods or services. There are two types of Marginal utility:

• Positive Marginal utility-  It is when the additional utility of an item increases the total utility.
• Negative Marginal utility- It is when the additional utility of an item decreases the total utility.
• For example:  A person has 5 chapati, he is quite hungry and decides to eat 5 chapati.He ate one chapati and gains positive utility. This is so because he was hungry the very first chapati has high benefit for him. Then he ate 2nd chapati his appetite is became satisfied as he wasn't as hungry as before,this second chapati had smaller benefitsas compared to first one. The 3rd chapati holds even less utility as the individual is not hungry any more. The fourth chapati will make him experience a diminished marginal utility as well aa it will become difficult for him to consume it. Finally the fifth chapati cannot be consumed by him. This will now result in negative utility.