Answer:
The concept of diminishing marginal utility states that the additional utility gained from each additional unit of a good tends to decrease as consumption increases.
The principle of diminishing marginal utility states that as a person consumes more of a good or service, the additional satisfaction or marginal utility derived from each additional unit will tend to decrease. For example, when someone eats one slice of pizza, the satisfaction they derive from it may be substantial. However when they eat the second slice, the additional satisfaction may not be as great as the first slice. This reflects the concept of diminishing marginal utility.
Step-by-step explanation:
The concept of diminishing marginal utility is an important concept in economics that describes the relationship between the consumption of a good or service and the satisfaction derived from it. The basic idea is that as a person consumes more of a good or service, the additional satisfaction or utility obtained from each additional unit tends to decrease.
In the example of a pizza, the first slice may provide high satisfaction because the initial desire is fulfilled. However, each subsequent slice may provide diminishing additional satisfaction because the primary desire has already been partially fulfilled. This reflects the fact that humans tend to allocate their resources in a way that maximizes overall satisfaction.
The concept of diminishing marginal utility has important implications in consumer decision-making and helps explain common consumer behavior patterns observed in the market. Understanding the concept of diminishing marginal utility assists economists and decision-makers in optimizing resource allocation and comprehending how changes in consumption can affect overall satisfaction.