Importance of law of diminishing marginal utility

2 ANSWERS

1. Harry
   

    In economics, the marginal utility of a good or service is the utility gained (or lost) from an increase (or decrease) in the consumption of that good or service. The “law” of diminishing marginal utility states that as additional amounts of a good or service are added to available resources, their marginal utilities are decreasing. This “law” is sometimes treated as a tautology, sometimes as something proven by introspection, or sometimes as a mere instrumental assumption, adopted only for its perceived predictive efficacy. Actually, it is not quite any of these things, though it may have aspects of each. The “law” does not hold under all circumstances, so it is neither a tautology nor otherwise provable; but it has a basis in prior observation. The law of diminishing marginal utility is at the heart of the explanation of numerous economic phenomena, including time preference and the value of goods; and it also plays a crucial role in showing that socialism is economically and ethically inferior to capitalism. Given the importance of the law of diminishing marginal utility for economic theory and policy, it is important to keep advertising that the law of diminishing marginal utility is irrefutably true — because it follows from the axiom of human action. For ignoring this truth leads to fallacious and erroneous conclusions, and eventually to false economic theory and economic policies.

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2. Guest10571807
   

   what is marginal product

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