Law of Diminishing Marginal Utility

Let's say you are hungry and in the market for kiwis. Perhaps if you only eat 1 kiwi, it would be worth 10 utils. If you had two kiwis, your total utility would be about 16 utils. If you had 3 kiwis, your utility would be worth 18 utils.

While your total utility increases with each successive kiwi you consume, your marginal utility is dropping the entire time. Eventually you're so stuffed, your total utility begins to fall as well.

This is true for all normal goods and is the basis for the downward sloping demand curve.



Kiwi                      Total Utility              Marginal Utility

1                                    10                                   10
2                                    16                                    8
3                                    18                                    6
4                                    16                                    4
5                                    10                                    2