Community and Government

Economics 101: What Is Diminishing Marginal Utility? Learn About the Law of Diminishing Marginal Utility in Business With Examples

Written by MasterClass

Last updated: Oct 12, 2022 • 3 min read

How much would you pay for a cell phone? The answer probably depends on your current phone status. If you don’t presently have a phone, you’d likely pay upwards of a thousand dollars for a phone with fast internet connectivity, a great camera, and long battery life. Now let’s say you bought that phone. How much would you pay to acquire a second phone to go along with it? Probably far less than you would have paid for the first one. And you’d pay less still to acquire a third phone. The fact that you’d pay less for each successive phone helps illustrate the law of diminishing marginal utility.