Diminishing Marginal Utility

The law of diminishing marginal utility shows that with each additional unit of consumption one's satisfaction decreases. This means that the more a person consumes of a certain good, the less utility they receive by consuming more of that good. As the quantity of a good increases, the marginal utility decreases.

Consider you are eating a bowl of cereal. The first bowl you eat gives you a large amount of satisfaction. However, when you eat the second bowl you are less hungry, and so receive less satisfaction from that bowl. The marginal utility decreases with each additional bowl of cereal. This concept is illustrated in this comic below.

diminishing_marginal_utility.gif


Links:
http://www.investopedia.com/terms/l/lawofdiminishingutility.asp
http://william-king.www.drexel.edu/top/prin/txt/Much/Eco416.html
http://financial-dictionary.thefreedictionary.com/Law+of+Diminishing+Marginal+Utility