Question

What are the applications and uses of diminishing marginal utility?

Answer 1

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The Law Of Diminishing Marginal Utility states that all else equal as consumption increases the marginal utility derived from each additional unit declines. Marginal utility is derived as the change in utility as an additional unit is consumed. Utility is an economic term used to represent satisfaction or happiness.

Answer 2

This application of the law of marginal utility demonstrates why a rise in the money stock (other things being equal) reduces the exchange value of a money unit since each successive unit of money is used to purchase a less valuable end.