All questions on Economics

Diminishing returns and the demand curve

Explain the "Law of diminishing marginal utility" and its relationship to thederivation of an individual demand schedule and curve

I think you are working around the topic of Marginal Revenue Product (MRP), within the labour market. Marginal analysis refers to establishing what happens when (in this case) you take on one more extra worker and how much revenue that extra worker brings to the organisation. As more workers are added the extra revenue brought to the firm is smaller due to dis-economies of scale and this relationship is referred to as Diminishing Returns. The higher the MRP figure the greater the demand for labour is therefore creating a negative demand schedule for labour.
03 November 2013
Hi,The law of diminishing marginal utility can be looked at in terms of services or products; for example, a product may become less appealing to a consumer once the consumer has used the product many times.Simply put, this law indicates that the satisfaction a consumer receives from a good or service diminishes (declines) with each additional unit used or bought.Hope this helps :-)
18 December 2013
Hi Paul. Utility is the satisfaction a consumer derives from consuming a good or service - marginal utility is the amount of utility derived from consuming an extra unit of that good or service. The law of diminishing marginal utility states that as a consumer consumes a commodity, the utility they gain from that consumption falls as they consume more of that good or service. Now, how does this affect a demand curve? Essentially, it helps explain why the demand curve is the shape it is (downward sloping). As quantity consumed increases, price falls. This might be explained by consumers gaining less and less utility, and thus the price they are willing to pay falling as quantity increases. Hope this helps.
Tom C.
31 December 2013
As you consume more of a good, every extra of that good you consume brings you less utility. 
Paul T.
06 January 2017
Add an answer

Similar questions