The law of diminishing marginal utility states that all else equal, as consumption increases, the marginal utility derived from each additional unit declines. Marginal utility is the incremental increase in utility that results from the consumption of one additional unit. "Utility" is an economic term used to represent satisfaction or happiness .
Does marginal utility diminish?
Failure of marginal utility to diminish would thus lead to extraordinary levels of consumption of a single good to the exclusion of all others. Since we do not observe that happening, it seems reasonable to assume that marginal utility falls beyond some level of consumption.
What is the law of diminishing marginal revenue?
The law of diminishing marginal revenue states that once maximum efficiency is reached, the amount of profit earned per unit will decrease. This can be due to demand saturation (i.e., diminishing marginal utility for consumers) or escalating production costs (i.e., diminishing marginal product for production).
