Law of Diminishing Marginal Utility


Also found in: Acronyms.

Law of Diminishing Marginal Utility

In economics, the theory that for each additional unit of a product an individual consumes, the less utility or satisfaction the person derives from it. This is important to determining how much supply of a product the market can handle without diminishing demand. Historically, it has been thought that one can quantify the marginal utility of each unit, but some economists disagree with this. See also: Austrian school.
References in periodicals archive ?
The emerging view in welfare economics, particularly developed by Edgeworth and Cannan, was that the law of diminishing marginal utility guaranteed income redistribution would necessarily result in higher aggregate welfare.
Al-Shaybani, for example, discussed the issue of consumption behaviour and touched on the idea of what nowadays in economics is called the law of diminishing marginal utility.
The labor theory of value doesn't take into account the well-established law of diminishing marginal utility, which states that the value to the customer declines with additional consumption of the good in question.