Question

The law of diminishing marginal utility implies that when an individual consumes an additional unit of a good, what happens to the satisfaction or utility derived from that unit?

Answer 1

The law of diminishing marginal utility states that the satisfaction or utility derived from consuming an additional unit of a good decreases. This concept explains why people consume a variety of goods and are willing to substitute one good for another.

Step-by-step explanation:

The law of diminishing marginal utility states that when an individual consumes an additional unit of a good, the satisfaction or utility derived from that unit decreases. This concept suggests that as you consume more of a good, the additional utility or happiness you get from each additional unit will gradually decrease.

For example, let's say you love chocolate. The first chocolate bar you eat gives you a lot of satisfaction. However, as you eat more and more chocolate bars, the additional satisfaction you get from each additional bar will start to diminish.

This law helps explain why people usually consume a variety of goods rather than just one thing. It also helps explain why people are willing to substitute one good for another when the marginal utility of the first good diminishes.