Final answer:
The principle of diminishing marginal utility states that as a person receives more of a good, the additional utility from each subsequent unit declines. An example is José receiving less utility from each additional T-shirt he buys after his favorite. This principle is part of the law of diminishing returns important in marginal analysis.
Step-by-step explanation:
The principle of diminishing marginal utility states that as a person receives more of a good, the additional utility from each additional unit of the good declines. This principle can be understood through an example: Let's imagine José is buying T-shirts. The first T-shirt he picks is his favorite and provides him with an addition of 22 utils. By the time he picks his fourth T-shirt, it's only to have a spare when other clothes are dirty, yielding only 18 additional utils. This demonstrates that the utility José gets from each subsequent T-shirt is less than the one before, illustrating the diminishing marginal utility which occurs because each additional unit of a good consumed adds less to his overall satisfaction than the previous unit.
This concept of diminishing marginal utility is a reflection of the broader law of diminishing returns, which states that adding more of a production factor, like labor or capital, to the production process will eventually produce lower per-unit returns. This principle is essential for decisions made on the margin, which might be studied in marginal analysis.