Final answer:
Utility refers to the subjective value an individual derives from consuming a product or service, measured in utils. Utils cannot be compared between individuals due to their subjective nature. The law of diminishing marginal utility describes a common pattern where the satisfaction from consuming additional units of a good decreases over time.
Step-by-step explanation:
Utility is the subjective value of an outcome. It represents the level of satisfaction or usefulness that an individual derives from consuming a product or service. This subjective assessment of utility is measured in units called utils, which cannot be compared between individuals because utility is personally subjective.
As a person consumes more of a good, the utility they receive tends to increase but at a decreasing rate, a concept known as the law of diminishing marginal utility. This means that the additional satisfaction from each extra unit consumed (marginal utility) decreases as one consumes more.