Saturday, August 4, 2018

As consumption increases the marginal utility derived from each additional unit declines? Why?

As consumption increases the marginal utility derived from each additional unit declines? yes it declines.

Utility is the amount of satisfaction a person gets from consumption of a certain item. 


Definition: - According to MARSHALL,” The additional benefit a person derives from a given increase of his stock of a thing diminishes with every increase in the stock that he already has.” 


 Let us understand this through an example: - Consuming one chocolate may satisfy a person desire. If a second chocolate bar is consumed, the satisfaction of eating that second bar will be less that the satisfaction gained from eating the first, if a third is consumed the satisfaction will be even less.


No of chocolates
Marginal utility
Total utility
1
100
100
2
80
180
3
50
230
4
20
250
5
0
250
6
-20
230




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