Explanation and example of law of diminishing marginal utility
This law can be explained by taking a very simple example. Suppose a man is very thirsty. He goes to the market and buys one glass of water. The glass of water gives him immense pressure or we say the first glass of water has great utility for him. If he takes second glass of water after that, the utility will be less than that of the first one. It is because the edge of his thirst has been blunted to a great extent. If he drinks third glass of water, the utility of the third glass will be less than that of second and so on.
The utility goes on diminishing with the consumption of every successive glass of water till it drops down to zero. This is the point of satiety. It is the position of consumer’s equilibrium or maximum satisfaction. If the consumer is forced further to take a glass of water, it leads to dis utility causing total utility to decline. The marginal utility will become negative. A rational consumer will stop taking water at the point at which marginal utility becomes negative even if the good is free. In short, more we have a thing, ceteris paribus, the less we want still more of that, or to be more precise.
” In given span of time, the more of a specific product a consumer obtains, the less anxious he is to get more of that product ” or we can say that as more units of a good are consumed, additional units will provide less additional satisfaction than previous units. The following table and graph will make the law of diminishing marginal utility more clear.