Law of diminishing marginal utility
we usually face this situation where
restaurants offer unlimited food. People get attracted to the word unlimited,
but the fact behind is law of diminishing marginal utility. People thought they
can eat more food for a given price but they can’t. people get satisfaction for
the first three utilized items, but as the order increases their marginal utility
decreases.
The customer’s marginal utility at
the initial state remains high and customer have starters, but consumption
increases, now marginal utility decreases as a result customer eats less. hence
company makes profits from such offers.
With the continuous usage of a good,
marginal utility derived from each extra unit starts decline. This is law of
diminishing marginal utility.
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