The Law of Diminishing Marginal Utility basically says that buyers will tend to get _ marginal utility or satisfaction out of consuming one more unit of a product.
a. no b. less c. negative d. much more e. randomly fluctuating
The correct answer and explanation is:
The correct answer is b. less.
The Law of Diminishing Marginal Utility is a fundamental concept in economics that explains how a consumer’s satisfaction or utility from consuming a good or service decreases as they consume more of it. The law states that as a person consumes additional units of a product, each additional unit provides less utility or satisfaction than the previous one. This principle holds true for most goods and services, although there are exceptions.
For example, if you are very hungry and eat your first slice of pizza, it may give you a high level of satisfaction. However, by the time you eat your third or fourth slice, the satisfaction from each subsequent slice will be less than the first. This decrease in the added satisfaction from each unit is what is referred to as “diminishing marginal utility.”
This phenomenon occurs because people’s desires or needs for a particular good are not infinite. After a certain point, the consumer reaches a level of saturation, and additional consumption of the same product adds less value. In some cases, excessive consumption might even lead to a negative marginal utility, where further consumption of the product becomes unpleasant or harmful.
Understanding diminishing marginal utility helps explain consumer behavior and decision-making. It also underpins the downward-sloping demand curve in economics. When the marginal utility of a product decreases, consumers are less willing to pay the same price for additional units, leading to a decrease in demand as price increases. Conversely, if the price of a product drops, consumers are more likely to purchase additional units because the perceived utility remains higher than the price being paid.