PRINCIPLES OF ECONOMICS LECTURE 1

Описание: Quick overview of Basics of Economics.
The Law of Diminishing Marginal Utility is a fundamental concept in economics that suggests the diminishing satisfaction or utility gained from consuming additional units of a product. Its core premise revolves around several key assumptions.

1. **Rational Behavior**: Consumers act rationally, aiming to maximize their utility and making choices that offer the most satisfaction.

2. **Homogeneous Units**: Each unit of the product consumed is assumed to be identical in quality and nature, ensuring consistency in utility derived from each unit.

3. **Fixed Preferences**: Consumer preferences remain constant during the consumption process, assuming no change in taste, habits, or preferences.

4. **Continuous Consumption**: The consumption of goods is continuous and not interrupted, allowing for a clear observation of the diminishing marginal utility with each additional unit consumed.

5. **No External Factors**: The law assumes no influence from external factors such as advertising, peer pressure, or changes in income that might impact the perceived utility of a product.

The law suggests that as a person consumes more of a particular good, the additional satisfaction or utility derived from each subsequent unit diminishes, eventually leading to a point where the marginal utility becomes zero or even negative. This concept is crucial in understanding consumer choices, pricing strategies, and resource allocation in economics.