Law of Diminishing Marginal Utility
Demand
AO2·HL
Syllabus requirement
As consumption increases, the marginal utility derived from each additional unit decreases.
Assessment objectives
AO2 Application and Analysis
Higher LevelThis topic is assessed at HL.
Summary
The law of diminishing marginal utility states that as a person consumes additional units of a good or service, the extra satisfaction (utility) gained from each new unit falls. This declining marginal utility helps explain why consumers accept lower prices to buy more and why demand for a product typically decreases with higher quantity consumed.