Future Business Leaders of America (FBLA) Agribusiness Practice Test

What is described as the decline in satisfaction or benefit from consuming a product or service as its consumption increases?

1. Diminishing Marginal Utility

2. Demand

3. Equilibrium Price

4. Economic Opportunities

The correct answer is: Diminishing Marginal Utility

The concept referred to is the decline in satisfaction or benefit that consumers experience as they consume more of a given product or service, which is known as Diminishing Marginal Utility. This economic principle highlights that as a person consumes additional units, the added satisfaction (or utility) that each additional unit provides tends to decrease. For instance, consider eating slices of pizza; the first slice might bring a high level of satisfaction, but by the time you reach the fourth or fifth slice, you may find that each additional slice contributes less to your overall enjoyment. This principle is crucial for understanding consumer behavior and market demand because it helps explain how individuals make choices based on their perceived value of goods and services at different consumption levels. This understanding is distinct from other concepts, such as demand, which relates to the level of desire for a product in the market, and equilibrium price, which is the market price at which the quantity supplied equals the quantity demanded. Economic opportunities refer to the potential for earning income or profit in various ventures and are not directly related to the incremental benefits obtained from consumption. Thus, the focus on diminishing marginal utility clarifies how consumption affects perceived value, making it a foundational concept in consumer theory.