What Is Utility?
In economics, utility is just a fancy word for satisfaction or happiness we get from consuming a product or service. For example, when you eat a plate of your favourite biryani, the enjoyment or satisfaction you get is your utility. It doesn’t have to be food—it could be the happiness of buying a new phone, watching your favourite movie, or listening to music.
So, more utility = more satisfaction.
The Idea of Marginal Utility
Now, let’s break down the term marginal utility.
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Marginal means “extra” or “additional.”
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Utility means satisfaction.
So, marginal utility is the extra satisfaction you get from consuming one more unit of something.
For example:
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Eating the first slice of pizza when you are hungry gives you a huge amount of satisfaction.
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Eating the second slice also makes you happy, but maybe not as much as the first one.
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By the third slice, you are starting to feel full, so the enjoyment is less.
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If you push yourself to eat the fourth or fifth slice, you may actually start to feel discomfort rather than joy.
This declining satisfaction as you consume more is what economists call the Law of Diminishing Marginal Utility.
The Law in Simple Words
The Law of Diminishing Marginal Utility says:
As a person consumes more units of a good or service, the additional satisfaction (marginal utility) they get from each extra unit decreases.
In other words, the more we have of something, the less extra happiness we get from having even more of it.
Everyday Example: The Pizza Story
Imagine this scenario:
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You are really hungry after college. You buy a box of pizza with six slices.
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The first slice feels heavenly. You were starving, so the satisfaction is maximum.
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The second slice still tastes great, but the happiness is slightly less.
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The third slice is okay—you’re now half-full.
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The fourth slice doesn’t excite you as much, it feels just “normal.”
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The fifth slice makes you feel heavy and tired.
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By the sixth slice, you regret eating so much. The satisfaction might even turn into discomfort.
This is diminishing marginal utility at work: every additional slice gives less and less extra happiness.
Why Does This Happen?
This law is not just about food—it’s about human psychology. Some reasons why this happens are:
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Basic Needs Get Satisfied First
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When you are hungry, the first bite satisfies a deep need. But once that need is partly satisfied, each next bite is less urgent.
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Saturation Point
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Your body and mind can only handle a certain amount of pleasure before you feel “enough.”
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Novelty Wears Off
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The first time you taste something, it feels exciting. But the same thing repeated again and again feels ordinary.
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Other Everyday Examples
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New Mobile Phone
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The first day with your new phone feels amazing. You keep exploring its features. After a month, it feels like just another phone, and the excitement drops.
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Watching Your Favourite Movie
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The first time you watch it, you enjoy it a lot. The second time, still fun. But after the fourth or fifth time, the thrill is gone.
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Social Media Likes
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Getting your first 100 likes on a post feels fantastic. But after you regularly get hundreds of likes, the excitement of each new like is less.
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Importance in Real Life
The law of diminishing marginal utility is not just a fun observation—it has real significance:
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Why We Diversify
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You don’t eat the same food every day, listen to the same song all week, or wear the same shirt daily. Your satisfaction decreases if you repeat things, so you look for variety.
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Why Prices Work
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If you’re very thirsty, you’ll pay a high price for the first bottle of water. But once you’ve had enough, you won’t pay the same for the second or third bottle. That’s why demand usually decreases as price increases.
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Decision-Making
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This law helps explain why people budget their money. If you spend all your money on only one thing, your satisfaction will drop quickly. By spreading spending across food, clothing, entertainment, and so on, you maximize happiness.
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A Simple Diagram
If we put this on a graph:
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On the x-axis = number of slices of pizza.
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On the y-axis = satisfaction (utility).
The first slice gives a high value, the second a bit lower, and so on, until the curve slopes downward. This curve visually shows diminishing marginal utility.
Criticism and Exceptions
Though this law is widely true, there are some exceptions:
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Addiction: For alcohol, drugs, or even video games, sometimes people feel more excited with more consumption.
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Collectibles: For some people, the joy of adding one more rare coin, stamp, or sneaker doesn’t diminish quickly.
But in general, for most goods and services, diminishing marginal utility is a natural human behaviour.
Conclusion
The Law of Diminishing Marginal Utility is one of the simplest yet most powerful ideas in economics. It explains why the first bite of your favourite food tastes so good, while the last bite doesn’t bring the same thrill. It shows that human satisfaction decreases as consumption increases, and this principle guides not only our daily choices but also major economic decisions like pricing, demand, and resource allocation.
So next time you’re enjoying pizza, coffee, or even scrolling social media—remember, economics is quietly at work in your life.
In short:
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Utility = satisfaction
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Marginal Utility = extra satisfaction from one more unit
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Law of Diminishing Marginal Utility = extra satisfaction decreases as you consume more
And that’s why the first slice of pizza is always the best one.