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The law explains why each additional unit of the same product may provide less extra satisfaction than the previous one, when a person consumes more of it over a period of time.
The main idea
Less extra satisfaction
Imagine eating slices of pizza when you are hungry. Each additional slice may satisfy you less than the previous one.
Conceptual illustration only. Satisfaction is subjective and these bars are not measured consumer data.
The law concerns marginal utility—the additional satisfaction from one more unit—not necessarily the total satisfaction from all units combined.
Definition
The law of diminishing marginal utility states that, as a consumer consumes more successive units of the same good during a given period, the additional satisfaction from each extra unit tends to decrease, assuming relevant conditions remain unchanged.
A consumer uses or consumes additional units of the same good.
Each successive unit generally adds less satisfaction than the previous one.
Total satisfaction may keep increasing even while each extra unit adds less than the previous one.
In simple words: the first unit may satisfy a strong need, while the next unit satisfies a smaller remaining need. This is a general economic principle, not a claim that every person experiences exactly the same level of satisfaction.
Key terms
Understanding the difference between total utility and marginal utility is essential for learning this law.
The total satisfaction a consumer receives from consuming all the units of a good.
Illustrative example
20 + 16 + 12 = 48
If the first three units provide 20, 16, and 12 utility units respectively, total utility is 48 utility units.
The change in total utility resulting from consuming one additional unit.
Formula
MU = Change in TU
When one extra unit increases total utility from 36 to 48, its marginal utility is 12 utility units.
Total utility measures overall satisfaction, while marginal utility measures the additional satisfaction from the next unit. Diminishing marginal utility does not mean total utility must immediately fall.
Numerical example
The following hypothetical schedule shows how satisfaction changes as a person consumes successive units of a product.
Utility values are illustrative units, not rupee amounts.
| Units consumed | Total utility (TU) | Marginal utility (MU) | Interpretation |
|---|---|---|---|
| 0 | 0 | — | No consumption |
| 1 | 20 | 20 | Extra satisfaction |
| 2 | 36 | 16 | Extra satisfaction |
| 3 | 48 | 12 | Extra satisfaction |
| 4 | 56 | 8 | Extra satisfaction |
| 5 | 60 | 4 | Extra satisfaction |
| 6 | 60 | 0 | No extra satisfaction |
| 7 | 56 | -4 | Total utility falls |
Third unit
MU = 12
Total utility rises from 36 to 48.
Sixth unit
MU = 0
Total utility remains at 60 in this example.
Seventh unit
MU = −4
Total utility falls from 60 to 56.
Marginal utility of the third unit = total utility after three units − total utility after two units.
The extra satisfaction from the third unit is 12 units, lower than the 16 units added by the second unit. This illustrates diminishing marginal utility.
Visual explanation
The graph illustrates the relationship between consumption, total utility, and marginal utility using the same hypothetical schedule.
This illustrative graph uses the utility schedule below. Total utility eventually reaches a maximum, while marginal utility falls as more units are consumed.
Total utility rises
Additional units can continue to add satisfaction, but at a diminishing rate.
Marginal utility is zero
In this example, the sixth unit adds no extra utility and total utility reaches its maximum.
Marginal utility is negative
The seventh unit reduces total utility in this illustrative schedule.
Everyday applications
The law can help explain common consumption choices, although individual preferences and circumstances vary.
Imagine someone who is thirsty and begins drinking cups of chai one after another.
How satisfaction may change
The first cup provides substantial satisfaction.
The second cup is enjoyable, but may add less satisfaction than the first.
After several cups, another cup may provide little extra satisfaction or even cause discomfort.
As consumption increases, the additional satisfaction from each cup may decline.
A hungry customer orders several slices of pizza for a meal.
How satisfaction may change
The first slice satisfies strong hunger.
The next slices continue to provide satisfaction, but the extra benefit may become smaller.
When the customer is full, another slice may add almost no satisfaction.
The usefulness of an additional slice depends on how much the customer has already eaten.
A customer buys several similar decorative items for a festival.
How satisfaction may change
The first item may meet an important need.
The second item may be useful for another room or family member.
Many more identical items may add progressively less satisfaction.
The extra benefit of similar items can decline as a person's need is increasingly satisfied.
Conditions
Economics textbooks commonly explain this law under a set of simplifying assumptions.
The units consumed are treated as similar in quality and size.
Units are consumed within a period where preferences and needs have not fundamentally changed.
The consumer's tastes and preferences are assumed not to change during the comparison.
The units are consumed in succession rather than after a major change in the consumer's circumstances.
The consumer is assumed to make choices that broadly reflect their preferences and perceived satisfaction.
The example assumes that factors affecting satisfaction, such as context and the person's condition, remain broadly unchanged.
Understanding the limits
The law is a useful model of consumer behaviour, but the amount of satisfaction people experience cannot always be predicted precisely.
One person may enjoy several cups of tea, while another may prefer only one. The pattern and speed of diminishing satisfaction can vary.
A second item that is different in quality, size, or usefulness may provide more satisfaction than the first. This makes it important to compare similar units.
Additional items can become more useful when they complete a collection or pair with other items. Such situations may not follow a simple diminishing pattern at every step.
Satisfaction is personal and cannot usually be measured directly in exact numerical units. Utility schedules are teaching models that help explain the concept.
Frequently asked questions
It means that consuming more units of the same good generally gives a person less additional satisfaction from each successive unit, assuming relevant conditions remain unchanged.
The law is a standard principle in consumer behaviour in economics and is associated with the development of marginal utility analysis by economists including Hermann Heinrich Gossen.
Marginal utility is the change in total utility resulting from consuming one additional unit of a good.
Yes. Total utility can continue to increase as long as marginal utility remains positive, even if each extra unit adds less satisfaction than the previous one.
In the standard numerical model, total utility reaches a maximum when marginal utility is zero. If marginal utility becomes negative, total utility decreases.
A hungry person may receive high satisfaction from the first slice of pizza and progressively less additional satisfaction from later slices as hunger is reduced.
Not necessarily. In basic utility schedules, marginal utility is often represented in hypothetical utility units. It should not automatically be interpreted as a monetary amount.
The law of diminishing marginal utility explains why each additional unit of a good generally adds less satisfaction than the previous unit. Total utility may still rise while marginal utility is positive, reaches a maximum when marginal utility is zero in the standard model, and falls when marginal utility becomes negative.
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