How does an individual or household benefit from the law of diminishing marginal utility?

1. What is diminishing marginal utility How can you relate it to our everyday living?
2. What does the law of diminishing marginal utility apply to?
3. What is an advantage of the diminishing marginal utility curve?
4. How does diminishing marginal utility affect consumer spending?

What is diminishing marginal utility How can you relate it to our everyday living?

The law of diminishing marginal utility explains that as a person consumes an item or a product, the satisfaction or utility that they derive from the product wanes as they consume more and more of that product. For example, an individual might buy a certain type of chocolate for a while.

What does the law of diminishing marginal utility apply to?

The law of diminishing marginal utility applies to business in that it is closely connected to the law of demand. That law states that as price decreases, consumption increases and that as price increases, consumption decreases.

What is an advantage of the diminishing marginal utility curve?

The law of diminishing marginal utility is helpful to determine the value or price of a commodity. For example, the law explains that the marginal utility of a commodity decreases as the quantity of it increases. When the marginal utility falls, consumers do not prefer to pay high price.

How does diminishing marginal utility affect consumer spending?

The price a consumer is willing to pay for a good depends on its marginal utility, which declines with each additional unit of consumption, according to the law of diminishing marginal utility. Therefore, the price decreases for a normal good when consumption increases.