The Law of Diminishing Marginal Utility Applicable in Everyday Lifestyle
The change in utility of an item with time can be described as a marginal utility. The utility of an item entirely depends on the product you get and how much satisfaction or enjoyment it provides you. Let’s try to understand marginal utility in simple words.
Suppose you don’t have a smartphone and you decided to get one. This phone will bring you immense utility because you will have mobile connectivity from no connectivity. However, the phone’s value will diminish if you buy a second smartphone as it won’t add a great leap forward. The value keeps diminishing as long you buy more of the same item.
What is the Law of Diminishing Marginal Utility?
The law of diminishing marginal utility says that the value of commodities decreases as more of them are acquired, which means satisfaction of an item decreases as more of it you consume or obtain.
Effect of Law of Diminishing Marginal Utility in Everyday Lifestyle
The law of diminishing marginal utility is closely connected to economics, and firms use its application to understand their customers’ behaviour. It simply states that when the price of an item increases, its consumption decreases and vice versa; using this converse reasoning, we can determine when an item is more valuable and when it’s less.
If a consumer sees an item in sale less than the price he assumed, most of the time, he buys the product, and if he finds the product expensive, he never considers buying it. This is a very simple but quite useful concept that describes the mental connection between a product and its value. Firms use these basic but interesting laws and concepts to understand their customers and sell their products.
The law of diminishing marginal utility basically helps us understand the value of a product. Let’s take another example, suppose you go to a shop and buy a water bottle, you see plenty of other bottles at the shop. Each bottle has a great value, but its value will diminish as more of the bottle you buy. Hence, acquire the things that really add value to your everyday lifestyle; otherwise, the value of your commodity will diminish.