Future Business Leaders of America (FBLA) Agribusiness Practice Test

What happens to the utility derived from consuming a product as consumption increases?

1. It remains constant

2. It increases

3. It diminishes

4. It fluctuates

The correct answer is: It diminishes

As consumption of a product increases, the utility derived from each additional unit typically diminishes. This concept is known as the principle of diminishing marginal utility. Initially, consuming a product can provide significant satisfaction or utility, but as more units are consumed, the additional satisfaction gained from each subsequent unit tends to decrease. For example, when someone eats the first piece of pizza, it might satisfy a strong hunger. However, by the fourth or fifth piece, the additional satisfaction from eating more pizza is likely lessened, as the person's hunger is being satisfied, and they may feel full. This principle is foundational in economics and helps explain consumer behavior. The diminishing utility affects decision-making and purchasing practices, guiding consumers to weigh the benefits against the costs of additional consumption.