Diminishing Marginal Utility refers to the economical concept that each additional unit of something consumed or purchased will bring you less utility (happiness) than the preceding unit. This concept makes sense if you imagine it with regards to yourself. Let's say that you are dying of thirst, and you are just craving a capri sun juice box. The first capri sun is going to turn out to be everything you wanted and more. But it's not going to quite quench your thirst. So you have another capri sun. This one is also going to be great, but not quite as refreshing as the first. While your total utility went up after drinking the second capri sun, the marginal utility you gained from it was less than the marginal utility you gained from the first, thus the term diminishing marginal utility.

Diminishing Marginal Utility can help you determine how much of a certain thing you should buy or consume. Lets say the marginal utility of what you are buying or consuming is on a constant decline (it's diminishing). If the most recent unit you bought didn't bring you any happiness, most likely the next unit is going to take away happiness, and you shouldn't buy or consume it.





This video kicks off at 2:03 minutes and is a eating contest. After a while, the two competitors gain very little from the food they are eating because of the concept of diminishing marginal utility.


Utility_chart.gif
This chart shows the concept of diminishing marginal utility. The first chocolate bar eaten brings the consumer a great amount of utility. While the second bar still brings the consumer utility, it brings them less utility than the first bar. This is the concept of diminshing marginal utility.




A simple example of the utility gained from eating school lunch food, and how it diminishes with each additional bite.




Sample Problem: Fill out the rest of the chart. What does this say about uitlity and diminishing marginal utility?


# of Cans Drank
Utility of additional can
Total Utility
1

8
2

15
3

20
4
4

5

26
6
1

7

27


Sample Answers

Links-
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