Question

Recall the text’s definition of diminishing marginal utility: “the common pattern that each marginal unit of a good consumed provides less of an addition to utility than the previous unit.” The reason for this behavior is because of biology. Our body sends our brains a signal once too much of a good or service has been consumed. This prevents a person from literally eating until they explode. In your own experience, share two times instances where the law of diminishing marginal utility applied to you. Can you think of any time when the law of diminishing marginal utility failed for someone? Please answer in 150 words or more. Use your own words - please do not copy and paste from a web site. Be sure to reference your sources.

Answer 1

Answer

Utility is the usefulness of a good or a service that a consumer buys.It is the power of a good or service to satisfy consumer's wants or needs.For most of the goods and services, the marginal utility decreases with one extra unit of consumption of that goods and services. This is the the law of diminishing marginal utility. Yet there are some cases, where law of diminishing marginal utility totally fails.

In the following three cases, for the first two cases, I am going to show how the law of diminishing marginal utility works.In the third case ,the law of diminishing marginal utility doesn't hold.

Two instances where the law of diminishing marginal utility applied to me-

1. One day in last week, I was very thirsty.I was on the road, and I had no water bottle with me. So I consumed one green coconut as I like coconut water, and at the moment it could fulfill my thirst.The utility I got from one coconut water that time, didn't fulfill my whole satisfaction and I felt to consume one more green coconut, that could fulfill the rest of my satisfaction.After consuming one more green coconut, I realized that I had reached to the full satisfaction level of my thirst; and there was no need to consume one more green coconut.

Here, the diminishing marginal utility started after consuming the first green coconut.The first coconut gave me the highest utility, and it declined thereafter.The satisfaction or utility that I got from the second green coconut was not the same utility that I got from the first green coconut.After the consumption of the second green coconut,if I would consume the third one, my marginal utility would become 'zero'.

2. Last year I had watched a movie.It was such a wonderful movie, that I realized one time watch was not enough for me.To fulfill my satisfaction,I again bought a ticket for that movie, and watched it. After the second time watch, I didn't feel to watch it again. I realized that I had reached to the full of my satisfaction level.The third time purchase of ticket at same price and watching the movie wouldn't give me any more satisfaction.

An instance where law of diminishing marginal utility failed.

One of friends have a habit of collecting old stamps.I see her, the more she collects, the more she wants.She is never satisfied with her collection, and always in search for more and more.

Here the law of diminishing marginal utility totally fails. Whatever be the number of collection of old stamps, it never gives her full satisfaction, and she wants more and more of old stamps. The more she collects the old stamps, the more the utility she gets. So the law of diminishing marginal utility doesn't hold here.

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