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Today's lecture explores
diminishing marginal utility,
a key concept in consumer
theory and microeconomics.
Its origins traced back to
Aristotle who
discussed use value,
the usefulness of a
good to its owner.
However, this idea
was subjective and
didn't quantify satisfaction
from each additional unit.
The development of
marginal utility by
Stanley Jevons and
other neoclassical
economists addressed this,
introducing the principle that
as individuals
consume more units,
the utility from each
successive unit decreases.
Marginal utility is
the additional
satisfaction a consumer
receives from consuming
one more unit
of a good or service.
The law of diminishing
marginal utility states that
as a person consumes more
units of a good over a period,
the marginal utility from
each additional unit
eventually declines.
For example, the first
doughnut is highly enjoyable,
but by the third or
fourth, enjoyment drops.
Total utility can rise
with more consumption,
but it increases at
a decreasing rate
and may even fall if
consumption continues.
The principle of diminishing
marginal utility has
direct implications
for consumer choices
and the shape of
the demand curve.
As marginal utility decreases,
people are willing to pay less
for each additional unit.
This links directly to
the price a consumer will
pay and explains why the
demand curve slopes downward.
Economists equate the marginal
utility of a good to its price.
Consumers buy more only if the
utility matches or
exceeds the price.
