Discussion: One principle of utility analysis is Diminishing Marginal Utility. T
ID: 1095619 • Letter: D
Question
Discussion:
One principle of utility analysis is Diminishing Marginal Utility. Think about some things, goods or services, you "consume"?
Does the principle of Diminishing Marginal Utility apply, or as you "consume" more of the good or service do you experience "increasing" marginal utility, or is Marginal Utility constant as you consumer additional units?
Explain the good or service to your classmates and whether you experience Diminishing, Constant or Increasing Marginal Utility. Discuss why you and your classmates experience this effect.
Explanation / Answer
A law of diminishing marginal utility states that as a person increases consumption of a product - while keeping consumption of other products constant - there is a decline in the marginal utility that person derives from consuming each additional unit of that product.
Diminishing marginal utility applies to many products like consumption of food, playing football, working to earn money. In all of the above cases as you consume more of the goods, your willingness to buy additional unit decreases. The extra one unit gives you less utility compare to previous one.
For example, say you go to a buffet and the first plate of food you eat is very good. On a scale of ten you would give it a ten. Now your hunger has been somewhat tamed, but you get another full plate of food. Since you're not as hungry, your enjoyment rates at a seven at best. Most people would stop before their utility drops even more, but say you go back to eat a third full plate of food and your utility drops even more to a three. If you kept eating, you would eventually reach a point at which your eating makes you sick, providing dissatisfaction, or 'dis-utility'.
Increasing utility applies in the case of drinking of alcohol. As you drink more alcohol your willingness to drink another increases.