The law of diminishing marginal utility states that as an individual consumes more and more units of a specific good or service, the additional utility the consumer derives from the successive units keep on diminishing (declining) over time. Thus diminishing marginal utility explains a lot about consumer behavior in the market economy.
- Select a specific consumer behavior and construct a "mini case study" that highlights the workings of marginal utility and how it affects the consumption pattern for goods and services.
- Explain the roles total utility and marginal utility play to understand change in the consumer's behavior and preferences.
- Does the law of diminishing marginal utility hold for all goods and services we buy and consume? What are the exceptions?