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Definition of - 'Principle of Diminishing Marginal Satisfaction'

  • A decreasing rate of satisfaction in relation to an increasing income.

  • Finance Education Explains - 'Principle of Diminishing Marginal Satisfaction'

    When we consume more goods and services, it won't necessarily mean that we will receive more and more enjoyment. If our level of happiness is measured in terms of 1 unit, and a new car brings us 10 units of happiness, how much will the second car bring? Usually the answer is less than what it brought for the first car. Even though we now have two new cars, the second car doesn't bring the same amount of happiness. This continues the more and more we consume.