Question

While watching football on New Year’s Day, Sam thoroughly enjoyed watching the Fiesta Bowl. After this game ended, he turned on the Rose Bowl and while he still enjoyed the game, he didn’t enjoy it as much as the first game. After the Rose Bowl he watched the Sugar Bowl, and while he liked watching it, he didn’t enjoy it as much as the first two games. This experience is an example of ___________.

a) Diminishing marginal value
b) Increasing satisfaction
c) Risk aversion
d) Sunk Costs

Answer 1

a) Diminishing marginal value

Step-by-step explanation:

The law of diminishing marginal utility states that as more and more units of a product are consumed, the successive utility derived by each unit of extra consumption must fall.

Utility refers to the satisfaction derived by an activity. The activity could be consumption or performing a tasks which yields satisfaction.

The law was stated by Alfred Marshall.

In the given case, as Sam watches more and more of football, the satisfaction he derives from each successive match keeps on falling meaning he enjoyed watching the first match the most and the last match the least. This experience is an example of (a) Diminishing marginal value.