What does the law of diminishing marginal utility state?

The law of diminishing marginal utility asserts that as a person consumes more units of a good or service, the additional satisfaction or utility gained from consuming each successive unit tends to decrease. This means that while the first few units of a good may provide significant satisfaction, the added pleasure from subsequent units becomes less pronounced.

For example, if someone is eating slices of pizza, the first slice may bring a high level of enjoyment; the second slice might still be enjoyable, but by the third or fourth, the satisfaction from each additional slice typically diminishes. This concept helps explain consumer behavior and decision-making, as individuals often seek to maximize their total satisfaction given their limited resources.

Other concepts presented in the choices reflect different ideas about consumer satisfaction. For instance, some may suggest that utility continuously increases with consumption, which contradicts the principle of diminishing returns. Others imply that consumption doesn't affect satisfaction at all or that marginal utility remains constant with quantity, both of which misrepresent the dynamics of how utility changes with consumption. Thus, the correct understanding of diminishing marginal utility is pivotal in economics for explaining how consumers make choices and allocate their resources effectively.