Law of Diminishing Marginal Utility

• One of the very important laws in regard to the satisfaction of human wants is known as the law of diminishing marginal utility.
• It means MU tends to decline as consumption of the commodity increases.
• The law explains the common feeling of every consumer. 
• It means that every time the consumer increases his consumption, he gets less and less satisfaction. The satisfaction also tends to be zero when the consumer feels totally disgusted to take any more apples. If he takes more, his satisfaction turns negative or utility now becomes disutility.
• Suppose a person starts consuming apples one after another. The first apple gives him the maximum satisfaction as he might be in the mood to eat some food at that time to satisfy his appetite. 
• As he takes the second apple, he gets less satisfaction because by this time he has already met some level of appetite. 
• The third and more apples yield him lesser satisfaction or utility.
• Thus law of diminishing marginal utility states that additional satisfaction a person derives by consuming a commodity goes on declining as he consumes more and more of that commodity.
• According to Marshall, “The additional benefit which a person derives from a given increase of his stock of a thing diminishes with every increase in stock that he already has.”
• Two important reasons for diminishing marginal utility are the following:
1. Each particular want is satiable (can be satisfied): 
• Though there are unlimited wants, a single want can be satisfied. 
• Thus, when a consumer consumes more and more of a commodity, his want is satisfied and he does not wish to have any further increase in the commodity. 
• As such his marginal utility falls when consumption increases.
2. Goods are imperfect substitutes for one another i.e., one good cannot be exactly used in place of another: 
• Satisfaction from any two goods is not the same.
• Different goods satisfy different wants. If a good could be perfectly substituted for another, it would have satisfied other wants. 
• Hence, its marginal utility would not have fallen but increased.