Which Best Expresses The Law Of Diminishing Marginal Utility?

Which Best Expresses The Law Of Diminishing Marginal Utility
Explanation: The law of diminishing marginal utility is best expressed by the decrease in the additional satisfaction with the increase in the units of the output consumed by an individual.

What is the law of diminishing marginal utility?

Diminishing Marginal Utility – Diminishing marginal utility refers to the phenomenon that each additional unit of gain leads to an ever-smaller increase in subjective value. For example, three bites of candy are better than two bites, but the twentieth bite does not add much to the experience beyond the nineteenth (and could even make it worse). Which Best Expresses The Law Of Diminishing Marginal Utility Figure 13.2, Diminishing marginal utility of gains. Given a concave relationship between objective gains (x-axis) and subjective value (y-axis), each one-unit gain produces a smaller increase in subjective value than the previous gain of an equal unit.

  1. The marginal utility, or the change in subjective value above the existing level, diminishes as gains increase (shown on the y-axis to the right).
  2. Within the psychology literature, diminishing marginal utility is akin to the phenomena of affective habituation ( Dijksterhuis & Smith, 2002 ) and hedonic adaptation ( Brickman & Campbell, 1971 ).

The general finding in these lines of work is that people quickly adjust to affective experiences, so that repeated exposures to the same stimulus are less potent (habituation) and major events do not generally change people’s baseline affect (adaptation).

Psychological models of adaptation have been updated and qualified in recent years, and may apply differently to short-term and long-term changes (see, for example, Diener, Lucas, & Scollon, 2006 ), but the general pattern holds: humans acclimate to events, particularly small events, as their novelty subsides.

From a psychology perspective, diminishing marginal utility of short-term gains can be understood in terms of habituation—the first bite of chocolate tastes better than the second, and so forth—and long-term gains can be understood in terms of adaptation to a new zero point—winning the lottery does not permanently increase happiness but instead resets one’s reference point so that the subjective value of stimuli are evaluated with respect to that new starting point.

  • The tendency for returns on subjective value to diminish with repetition is relevant to how self-control plays out over time.
  • By our definition, self-control is required when there is a conflict between a high-level goal and a low-level goal or impulse.
  • Both options have some degree of subjective value, even if that value is derived from a different source (such as the immediate physical gratification associated with a positive experience or the sense of accomplishment that accompanies goal completion).
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Therefore, recent positive experiences that diminish the subjective value of one but not the other goal will influence self-control. Take, for example, the case of a smoker who is trying to quit and experiences a self-control conflict between the desire to smoke a cigarette (hedonic value) and the desire to quit (abstract goal value).

  1. According to the law of diminishing marginal utility, the subjective value of smoking an additional cigarette will be diminished if the smoker has just had a cigarette.
  2. Indeed, smokers are less likely to light up if they have recently smoked than if they were abstinent (and this effect also holds for food for most people; Epstein, Bulik, Perkins, Caggiula, & Rodefer, 1991 ).

Apart from physiological factors such as dependency, the subjective value of a temptation (such as a cigarette for a smoker) is diminished with sequential consumption. Similarly, the subjective value of abstinence should be lower when a quitter makes progress than when he or she feels that he or she is falling short.

As expected by diminishing marginal utility, motivation to attain a goal decreases if one focuses on the progress made toward that goal, particularly for goals to which an individual is highly committed ( Fishbach, Eyal, & Finkelstein, 2010 ). The law of diminishing marginal utility also applies to the case of ego depletion, a claim we will argue in a section later.

First, however, we present neuroscientific data in support of the valuation model of self-control. Read full chapter URL: https://www.sciencedirect.com/science/article/pii/B9780128018507000135

Which of the following best defines marginal utility?

Key Takeaways –

Marginal utility is the added satisfaction a consumer gets from having one more unit of a good or service.The concept of marginal utility is used by economists to determine how much of an item consumers are willing to purchase.The law of diminishing marginal utility is often used to justify progressive taxes.Marginal utility can be positive, zero, or negative.

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What are two examples of the law of marginal utility?

What are some examples of diminishing marginal utility? – Food is a common example of a good with diminishing marginal utility. Think of an apple, for example. If you’re starving, an apple offers pretty high value. But the more apples you eat, the less hungry you become — Making each additional apple less valuable.

An experience, like a vacation, can also have diminishing marginal utility. If you’ve never taken a vacation before, then your first one may carry a lot of value or utility. The more frequently you travel, however, each trip may become less exciting. (The same logic could apply to sports games, concerts, plays, etc.) The utility of additional consumption can even turn negative.

Let’s say you’ve caught the flu and need antibiotics. Each dose of medicine helps you recover. If you continue taking the antibiotics past the recommended amount, each additional dose may have less and less benefit, and eventually cause adverse side effects, like destroying healthy bacteria.

Which of the following statement is true regarding marginal economics?

The correct answer is: B. Marginal Cost is the incremental cost of one unit. Reason: Marginal cost is the additional cost incurred in producing one extra unit of output.

What is the correct expression for marginal utility?

Formula for marginal utility = change in total utility divided by the change in total units consumed.

Which of the following is the best definition of marginal cost?

Marginal Cost Definition – What is Marginal Cost Marginal cost refers to the increase or decrease in the cost of producing one more unit or serving one more customer. It is also known as incremental cost. Marginal costs are based on production expenses that are variable or direct – labor, materials, and equipment, for example – and not fixed costs the company will have whether it increases production or not.

  • Fixed costs might include administrative overhead and marketing efforts – expenses that are the same no matter how many pieces are produced.
  • It is often calculated when enough items have been produced to cover the fixed costs and production is at a break-even point, where the only expenses going forward are variable or direct costs.
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When average costs are constant, as opposed to situations where material costs fluctuate because of scarcity issues, marginal cost is usually the same as average cost.

Why is diminishing marginal utility important?

Put simply, with diminishing marginal utility, satisfaction decreases as consumption increases. Diminishing marginal utility is a law of economics and is an important concept for determining consumer preferences.

What is meant by diminishing marginal product?

What is Diminishing Marginal Productivity? – The Law of Diminishing Marginal Product is an economics concept. It says that, at early stages of production, if we increase 1 production variable and the rest of the things remain the same, the product total production may increase.

If, however, we continue to increase the input of that production variable, it will produce lesser returns (on average) per production variable. In simple words, an increase in the quantity of 1 production variable will increase the output up to a certain point. After that point, it will give less gain for each unit added.

The return on investment goes down. Back to : ECONOMIC ANALYSIS & MONETARY POLICY