Suppose you are outside on a hot sunny afternoon and you want to eat ice cream. At that very moment the urge for eating ice cream is very high so even if the ice cream costs $100 ( instead of orignal price $10) you will be ready to sacrifice the amount but once the first ice cream is consumed the craving for ice cream goes down and hence you won't be willing to sacrifice that much amount. This is known as the "Law of diminishing marginal utility".
The law of diminshing marginal utility states that as the consumption of a product increases the benifit (utility) derived from each extra unit decreases
Therefore, Marginal Utility is derived as the change in utility when an additional unit is consumed. The marginal utility (MU) diminishes over time and shorter the period more quickly MU diminishes.
For example : suppose you wanted to watch bahubali, you were very much excited before watching it. Now if after watching another friend of yours calls you again to watch the movie you may go and watch it again but the excitement will decrease.
Further, as the consumers are not identical - the rate of diminishing marginal utility may defer, it defers on the basis of individual tastes and preferences.
Suppose in the above example if the consumer is a true fan of prabhs then the decrease of excitement level may be not be that quick.
Hence , these factors explain the law of diminishing marginal utility.
The law of diminshing marginal utility states that as the consumption of a product increases the benifit (utility) derived from each extra unit decreases
Therefore, Marginal Utility is derived as the change in utility when an additional unit is consumed. The marginal utility (MU) diminishes over time and shorter the period more quickly MU diminishes.
For example : suppose you wanted to watch bahubali, you were very much excited before watching it. Now if after watching another friend of yours calls you again to watch the movie you may go and watch it again but the excitement will decrease.
Further, as the consumers are not identical - the rate of diminishing marginal utility may defer, it defers on the basis of individual tastes and preferences.
Suppose in the above example if the consumer is a true fan of prabhs then the decrease of excitement level may be not be that quick.
Hence , these factors explain the law of diminishing marginal utility.
No comments:
Post a Comment