- diminishing marginal utility
- diminishing marginal utility
A concept from economics that describes decreasing utility or desire for more
of the same product or service. The "law" states that the more we have of a
given product the less satisfaction (or utility) we receive from each additional
unit (for example, the first slice of pizza delivers more pleasure than the
second and this decreases with each additional slice).
This concept is often accepted as fact by economists and is at the core of
some economic theory but it is not necessarily the case. For example, a common
paradox at odds with diminishing marginal utility is the diamond-water
paradox in which water, which is necessary to life, is far less
expensive than diamonds, which have almost no practical value. According to
diminishing marginal utility, the more diamonds we have, the fewer we should
want (which isn’t usually the case with most people). Instead, it is the rarity
of diamonds and the ubiquity of water that account for their difference in
financial value.
It's importance to sustainable management is in it's ability to help explain
why increasing use of resources doesn't necessarily satisfy demand or diminish
desire for more. It uncovers an important flaw in neoclassical economic
theory.
source: http://www.sustainabilitydictionary.com/
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