Economics Marginal Utility Questions Medium
The law of diminishing marginal welfare, also known as the law of diminishing marginal utility, states that as a person consumes more and more units of a particular good or service, the additional satisfaction or welfare derived from each additional unit will eventually decrease. In other words, the more of a good or service a person consumes, the less satisfaction or welfare they will derive from each additional unit.
This law is based on the concept of diminishing marginal utility, which suggests that individuals have a limited capacity to derive satisfaction from consuming goods and services. As a person consumes more of a particular good, their initial level of satisfaction increases rapidly. However, as they continue to consume more, the additional satisfaction gained from each additional unit gradually diminishes.
For example, let's consider a person consuming slices of pizza. The first slice of pizza may provide a high level of satisfaction, as it satisfies their hunger and cravings. The second slice may also provide a significant amount of satisfaction, but to a lesser extent than the first slice. As the person continues to consume more slices, the additional satisfaction gained from each slice will decrease, eventually reaching a point where consuming more slices may even lead to discomfort or dissatisfaction.
The law of diminishing marginal welfare has important implications for consumer behavior and decision-making. It helps explain why individuals tend to allocate their resources towards goods and services that provide the highest level of satisfaction per unit, as they seek to maximize their overall welfare. Additionally, it highlights the importance of considering the marginal utility or satisfaction gained from each additional unit when making consumption choices.