Law of Diminishing Marginal Utility:

The Law of Diminishing Marginal Utility is an economic principle that states that as a person consumes more units of a specific good or service, the additional satisfaction or utility derived from each additional unit decreases over time. In other words, the more of a product or service a person consumes, the less satisfaction or enjoyment they derive from each additional unit. This law is based on the observation that individuals have limited wants and needs, and as those wants and needs are fulfilled, the desire for additional units decreases.

Utility Schedule:

A utility schedule is a tabular representation of the satisfaction or utility a consumer derives from consuming different quantities of a particular good or service. It helps to quantify the level of utility associated with each unit consumed.

To understand the Law of Diminishing Marginal Utility, let's consider an example of a person consuming slices of pizza. The utility schedule below illustrates the satisfaction or utility derived from consuming each additional slice of pizza:

Number of Slices of Pizza Utility
1 10
2 8
3 6
4 4
5 2

From the utility schedule, we can observe the following:

1. Diminishing Marginal Utility: As the number of slices of pizza consumed increases, the utility derived from each additional slice decreases. For example, the utility derived from the first slice is 10, but the utility derived from the second slice is only 8. This indicates that the additional satisfaction or utility obtained from the second slice is lower than that of the first slice.

2. Negative Marginal Utility: In some cases, the utility derived from an additional unit may even become negative. For example, in the utility schedule above, the utility derived from the fifth slice of pizza is 2, which is lower than the utility of consuming four slices (4). This implies that the fifth slice provides less satisfaction than the previous units, and the overall utility decreases.

Explanation:

The Law of Diminishing Marginal Utility can be explained by various factors:

1. Satiation: As a person consumes more units of a good or service, their desire or need for it diminishes. The initial units provide the most satisfaction as they fulfill essential needs, but as consumption continues, the satisfaction decreases.

2. Substitution Effect: As a person consumes more of a specific good, they may start seeking alternatives or substitutes to fulfill their needs. This reduces the marginal utility of the original good.

3. Variety and Preferences: Humans have diverse preferences and enjoy a variety of experiences. Consuming the same good repeatedly may lead to boredom, reducing the marginal utility.

4. Satiety: Physiological factors can also contribute to diminishing marginal utility. For example, when consuming food, a person may experience satiety, leading to a decrease in the satisfaction derived from each additional bite.

Conclusion:

The Law of Diminishing Marginal Utility highlights the declining satisfaction or utility obtained from consuming additional units of a good or service. As the utility derived from each unit decreases, individuals may seek alternative options or experience diminishing enjoyment. Utility schedules provide a quantitative representation of this concept, allowing for a better understanding of consumer behavior