The Law of Diminishing Marginal Utility and its Relationship with the Hierarchy of Needs
The marginal utility law outlines the behavior of marginal utility to reduce consumption below a certain level during a specific time period. It is used as a metric to examine a person's consumption of their preferences for a service or commodity. When dining at a buffet, we've all encountered diminishing marginal utility. This is due to the fact that adding each plate does not increase the advantage of additional food, which is our product. On the other hand, the consumer's interest fades gradually as they are filled. Every person has a limitless desire for food, yet in actuality, people can satisfy their unlimited desires (Gugnani, 2008). My personal experience was last week when I was selected to have a meal of buffet with our CEO. I spend the whole day in the office and was quite hungry. During the dinner time, we were served different types of meals in bits. Despite all of them being of the same quality, I was more appreciative of the first portion when I was hungrier.
The Law of Diminishing Marginal Utility and the Demand in the Market
The Law of Diminishing Marginal Utility is somehow related to the Hierarchy of Needs by Abraham Maslow. This implies that all wants are not equal and thus one has to satisfy the lower needs first before moving up the ladder of the human desires. According to the theory, a human being first satisfies the basic needs of food, shelter, and clothing which are at the lowest level before moving to the lesser basic ones (Gugnani, 2008).
The Law of Diminishing Marginal Utility and its Impact on Demand and Price
Maslow postulated that once a need is satisfied, it no longer motivates behavior as the person moves to satisfy wants above the basics. The law of diminishing marginal utility directly affects the demand in the market, the price in addition to the law of demand. In the event the satisfaction derived from a particular product reduces, then the consumers are ready to pay the reduced price. This makes demand price to be inverse to the quantity demanded.
References
Gugnani, S. (2008). Economics: Law of Diminishing Marginal Utility. Retrieved from http://economicsmicro.blogspot.kr/2008/11/law-of-diminishing-marginal-utility.html
