Law of Diminishing Marginal Utility

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Law of Diminishing Marginal Utility
This is an Economics definition
It is found mainly in the Demand and The Consumer section
Level	H/O

The Law of Diminishing Marginal Utility states that as a rational consumer buys more and more units of a particular commodity, eventually a point will be reached where the extra (marginal) utility gained from each additional unit falls.

Exceptions to the LDMU

1. Drugs of Addiction or essential medicine
2. When there is a time laps between consumption
3. If the consumer's income level changes
4. Changing tastes
5. If the amounts consumed vary

If asked in an exam, the exceptions can also be rephrased as assumptions:

1. The good is not an addictive drug or essential medicine
2. It is within a short time frame
3. The consumer's income level remains the same
4. The consumer's tastes remain the same
5. The quantity consumed remains the same

Everyday example

John loves big macs. John loves them so much that one day he goes to McDonalds and buys 5. He eats his first big mac, and is delighted, but still a bit hungry. He tells his friend that he would rate that big mac a 9 out of 10 (his Utility). He has a second and a third, and rates them both a 9 out of 10 aswell. At this stage his marginal utility (i.e. the satisfaction gained from each additional big mac) is remaining constant at 9. His total utility is 27 (out of 30). On the fourth big mac, he is getting a bit full and bored of just big macs, he kind of wishes he had got some fries too. He still loves big macs, but rates the fourth one a 7 out of 10. Even though his total utility has gone up from 27 to 34 (he is still happy with the fourth big mac), his marginal utility has gone down (from 9 to 7) and this is the point at which the law of diminishing marginal utility has kicked in.