What is Diminishing Marginal Utility (DMU)?

According to the Law of Diminishing Marginal Utility (DMU), with the consumption of more and more units of a commodity, the utility obtained from each successive unit decreases. Most consumers spread their income among different varieties of goods when making choices. People prefer a variety of goods as consuming more and more of any one good diminishes the marginal satisfaction obtained from continued use of that good. This law explains a significant relationship between utility and the quantity of a commodity that is consumed. This can be better understood by using the example mentioned below.

Suppose your mother offers you food after you just got home from work. The first chapatti will provide you with great satisfaction. With the second chapatti, you will feel less satisfied. As you consume more, you will reach a point where you will need another chapatti where the marginal utility will be zero. After that, if you are forced to eat even one more chapatti, it will lead to disutility. The Law of Diminishing Marginal Utility causes such a decrease in satisfaction with successive unit consumption.

The DMU law is universally applicable, and it applies to all products and services. It was initially proposed by a German economist, H.H. Gossen. Thus, it is also known as Gossen’s First Law of Consumption.