Future Business Leaders of America (FBLA) Agribusiness Practice Test

What typically causes the diminishing marginal utility of a product?

1. Increased competition in the market

2. Exhaustion of consumer preferences over time

3. Limited availability of products

4. Higher prices leading to dissatisfaction

The correct answer is: Exhaustion of consumer preferences over time

The diminishing marginal utility of a product primarily stems from the exhaustion of consumer preferences over time. This economic principle suggests that as a consumer continues to consume additional units of a product, the satisfaction or utility gained from each subsequent unit tends to decrease. Initially, the first unit of a product typically yields high satisfaction; however, as more units are consumed, the additional satisfaction gained from each further unit diminishes because the consumer's needs and wants are progressively satisfied. For example, if someone is eating slices of pizza, the first slice may provide a lot of satisfaction due to hunger. The second slice might still be enjoyable but not as much as the first. By the third or fourth slice, the enjoyment can significantly drop, illustrating diminishing marginal utility. This concept is fundamental in understanding consumer behavior and demand as it influences purchasing decisions and consumption patterns. The other options do contribute to market dynamics but do not directly explain the concept of diminishing marginal utility in the same way. Increased competition can shift market prices or influence quality but doesn't inherently change the utility experienced by the consumer per unit. Limited product availability may create scarcity or higher demand but doesn't alter the marginal utility concept itself. Higher prices may lead to dissatisfaction or reduce demand, but they do not directly result in the diminishing