What is Diminishing Marginal Utility

What is law of Diminishing Marginal Utility?

Learn about Law of Diminishing Marginal Utility with Dharamendra!

Watch this scene from a legendary movie called ‘Chupke Chupke’.

Chupke Chupke 1975

Case breakdown: Movie Chupke Chupke

It shows how Parimal Tripathi ( Played by Dharmendra) is continuously eating lunches and dinner at his friends’ place, only to have indigestion later. With every unit of lunch/ dinner he consumes, the satisfaction derived from the next lunch/dinner goes down, finally, he is advised to not eat food for some time. This blog, Learning Perspectives explores the meaning of Diminishing Marginal utility.

What is law of Diminishing Marginal Utility?

The word diminish means to ‘make or become less’ and Marginal utility (MU) means the benefit that is derived from consuming an additional unit of a product or service. The utility is an economic term that means satisfaction or happiness derived from consuming a product. The demand for any good is based on the ‘Law of diminishing marginal utility, which means that as the consumer goes on consuming a commodity, its utility goes on decreasing.

Example of Diminishing Marginal Utility:

Another example to understand this would be: when you have run a long marathon, consuming the first glass of water gives you the most satisfaction, the second glass of water is also satisfying but the level of satisfaction has come down, third glass of water gives even lesser utility as compared to the first and second as now the quench for thirst is subsiding.

This also directly ties up with the price, as one obtains the highest satisfaction with the first glass of water, and the consumer is willing to pay more for it. As he continues to reach satisfaction, he wants to pay lesser.

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