Law of Diminishing Marginal Utility

The single most important law in the cardinal theory of consumption is the Law of Diminishing Marginal Utility (DMU): as a consumer consumes more and more successive units of a commodity, per unit of time, the marginal utility derived from each additional unit goes on diminishing — other things (the consumer's income, tastes, and the prices of goods) remaining unchanged. The schedule in the previous section illustrates this exactly: MU falls steadily from 12 to 10 to 8 and so on, before eventually turning negative.

The law rests on a set of assumptions, and does not hold if any is violated: the consumer is rational and behaves consistently; the units of the good consumed are identical/homogeneous in size and quality; consumption is continuous, with no significant time gap between successive units (drinking five cups of tea back-to-back behaves differently from drinking one cup a day for five days); and the consumer's income, tastes, and the prices of related goods stay constant throughout, since a change in any of these would itself shift the utility a person gets, independent of how many units are consumed. …