What does the principle of diminishing marginal utility state?

The principle of diminishing marginal utility states that as an individual consumes more units of a good or service, the additional satisfaction or utility gained from each additional unit tends to decrease. This means that while the first unit consumed might provide a significant amount of satisfaction, each subsequent unit will likely provide less and less satisfaction. For example, if someone is eating slices of pizza, the first slice may be very enjoyable, but by the fourth or fifth slice, the additional satisfaction from consuming more likely diminishes.

This concept is fundamental in microeconomics as it helps explain consumer behavior and demand. It suggests that individuals will only be willing to pay for additional units up to the point where the satisfaction gained equals the price they have to pay for those units. Thus, the principle of diminishing marginal utility is crucial for shaping demand curves and understanding consumer choices in a systematic way.