Unit 2.1 · Demand
Law of Diminishing Marginal Utility
AO2HL
Syllabus Requirement
As consumption increases, the marginal utility derived from each additional unit decreases.
Assessment Objectives
AO2Application and Analysis
HLThis topic is assessed at Higher Level only.
Summary
The law of diminishing marginal utility explains that as people consume more units of a good or service, the additional satisfaction (utility) they receive from each extra unit decreases. This principle influences consumer behavior, leading them to buy more only if prices decrease, as the demand for a product is linked to the utility derived from it.