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Economics explained


Behavioral economics

Law of diminishing marginal utility

Law of diminishing marginal utility

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To see how marginal utility works, you need to recognise that the amount of utility that a given thing brings usually depends on how much of that given thing a person has already had.


If you’ve been really hungry the first slice of pizza that you eat brings you a lot of utility.

The second slice is also pleasant, but not quite as good as the first because you’re no longer starving.

The third, in turn, brings less utility than the second.

And if you keep forcing yourself to eat, you may find that the 6th slice of pizza actually makes you sick and brings you negative utility.

Economists refer to this phenomenon as diminishing marginal utility.

Diminishing marginal utility

Each additional, or marginal, piece of pizza brings less utility than the previous piece so that the extra utility, or marginal utility, brought by each successive slice diminishes as you eat more and more slices.

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