Example of Diminishing Marginal Utility
The concept of diminishing marginal utility can be better understood with the help of the following schedule and diagram:
Law of Diminishing Marginal Utility
In the above diagram, the units of apples are displayed on the X-axis and the MU on the Y-axis. Points A, B, C, D, and E reflect the MU from each successive unit.
It can be observed as the consumption of apples rises, the rectangles (which represent each level of satisfaction) get smaller and smaller. When consumption is increased from first to second and then third, MU decreases from 25 to 17 and then to 12 utils. The fifth apple is the Point of Satiety and has no utility (MU= 0). When the sixth apple is consumed, MU turns negative. The downward-sloping MU curve indicates that the MU of successive units is decreasing.