Law of diminishing marginal utility
Law of diminishing marginal utility : It states that when more and more unit of commodity are consumed MU derived from every additional unit must decline. This is also called fundamental law of satisfaction. Assumptions of the law: 1- Standard basket of the commodity should be consumed. 2- Consumption must be continuous. Example: An individual can buy a slice of Pizza at 20 Rs;he is quite hungry and decides to buy five slices of Pizza. After doing so,the individual consumes the first slice of Pizza and gains a certain positive utility from eating the food. Because the individual was hungry and this is the first food he consumed,the first slice of Pizza has a high benefit.Upon consuming the second slice of Pizza,the individual's hunger is becoming satisfied.He wasn't hungry as before,so the second slice of Pizza had a smaller benefit and enjoyment as the first.The third slice,as before,holds even less utility as the individual is now not hungry anymore. hence MU declined by eve
