Chapter 4
Chapter 4
Chapter 4
Marginal Utility
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One quality of marginal utility is that it always declines for each successive quantity
consumed of a particular good. If you like ice cream, and you eat one scoop,
the first scoop will provide the greatest satisfaction. If you eat another scoop,
you'll probably enjoy that also, but the satisfaction will be less than for the
first. At some point, you will not want any more ice cream. The marginal utility
will drop to zero and will even become negative. This is an everyday illustration
of the law of diminishing marginal utility. Marginal utility declines for
everything, including money. Although many people want to amass great
wealth, each dollar that is accumulated becomes worth less and less, because
the marginal utility of what it can buy declines.