Question

Explain the law of diminishing marginal utility and illustrate with marijuana? Examples

Answer 1

The law of diminishing marginal utility states that, other things remaining constant. as a person consumes more of a certain good, there is a decrease in the additional utility a person derives from consuming one additional unit of the good. At first, the marginal utility from consuming each unit of the good is more but as one continues consumption the marginal utility slowly falls to zero and turns negative with further consumption of that good.

Other things remaining constant means that the law of diminishing marginal utility follows certain assumptions which are:

(1) The good consumed should be exactly the same i.e. there should not be any change in the quality of the good.

(2) There should be no or limited time gap between the consumption of the two goods.

(3) The consumer's income, taste and preference should not change while consuming the goods.

(4) Utility can be measured in cardinal numbers.

(5) Marginal Utility of money should remain constant while consuming the goods.

Now, with these assumptions in mind, lets suppose a person is consuming marijuana. When the person is consuming a certain quantity initially he feels good, his body feels more relaxed and mild physical pain fades away and the person feels more positive mentally. But as the person consumes more and more units, his utility decreases. he doesn't feel as good as he felt when he consumed the initial quantities of marijuana and at a certain point it becomes zero and on consuming more, he doesn't derive any positive marginal utility instead he gets negative marginal utility such as short term memory problems, being confused what to do, having hangovers, etc. so he stops consuming any further unit of that good.