Diminishing Marginal Utility – AS/A LEVELS/IB/IAL

Courses Info

Diminishing Marginal Utility – Demand Curve

When someone consumes more and more of a good, the utility they get from each additional unit of output will become less and less (Diminish).
For example, after an evening of sports most individuals will be thirsty for water. The first few swigs of water will have a high level of utility/satisfaction. However, the more the athlete drinks, the less utility/satisfaction they will gain from another swig of water.
Therefore, the more the consumer drinks the less they will be willing to pay for an additional unit of output. This highlights the downward sloping nature of the demand curve.
It’s important to consider what happens to total utility for a product like chocolate. If a consumer keeps on having another chocolate bar the total utility would increase only up till a certain point. However, after this point the consumer would feel sick of eating another chocolate bar decreasing the marginal utility considerably.

This refers to the extra output derived for each additional unit of factor employed

This refers to the output produced for each unit of input; the output per worker over a specific period of time

This refers to the total output produced by a certain number of inputs / factors of production

The change in output after increasing inputs (the factors of productions)

Returns to Scale INCREASES – an increase in inputs leads to a larger increase in output

Returns to Scale DECREASES – an increase in inputs leads to a smaller increase in output

Constant Returns to Scale – an increase in inputs leads to an increase in output by the same amount

Next Revision Topics:

A Level Economics Past Papers

Economics Tutor