What Is The Law Of Diminishing Utility?

The Law Of Diminishing Utility is an important concept of Economics. According to this law, as the consumption of a product increases, there is a decline in the marginal utility from consuming each additional unit of that product, prior to the assumption that the consumption of other products is constant. This is similar to the fact that if we have had a large cup of ice-cream and we found it great. When we ask for another cup and start eating it, it does not taste as great as it tasted before. Thus with each spoon you eat the marginal utility of ice-cream decreases.

Say that consuming the first unit of ice cream gives you a certain level of satisfaction or utility. Now imagine consuming a second unit. Your total utility goes up because the second unit of the good gives you some additional utility. What about adding a third and fourth unit of the same good? Eventually, if you eat enough ice cream, instead of adding to your satisfaction or utility, it makes you sick.
This led us to the fundamental economic concept of marginal utility. When you eat an additional unit of ice cream, you will get some additional satisfaction or utility. The increment to your utility is called marginal utility.
The expression marginal is a key term in economics and always means extra. Marginal utility denotes the additional utility arising from consumption of an additional unit of a commodity.
A century ago, when economists thought about utility, they enunciated the law of diminishing marginal utility. This law states that the amount of extra or marginal utility declines as a person consumes more and more of a good.
Utility tends to increase as you consume more of a good. However, according to the law of diminishing marginal utility, as you consume more and more, your total utility will grow at a slower and slower rate.

As amount consumed of goods increases the marginal utility of goods tend to decreases