Diminishing Marginal Utility

A concept from economics that describes decreasing utility or desire for more of the same product or service. The “law” states that the more we have of a given product the less satisfaction (or utility) we receive from each additional unit (for example, the first slice of pizza delivers more pleasure than the second and this decreases with each additional slice).
This concept is often accepted as fact by economists and is at the core of some economic theory but it is not necessarily the case. For example, a common paradox at odds with diminishing marginal utility is the diamond-water paradox in which water, which is necessary to life, is far less expensive than diamonds, which have almost no practical value. According to diminishing marginal utility, the more diamonds we have, the fewer we should want (which isn’t usually the case with most people). Instead, it is the rarity of diamonds and the ubiquity of water that account for their difference in financial value.
It’s importance to sustainable management is in it’s ability to help explain why increasing use of resources doesn’t necessarily satisfy demand or diminish desire for more. It uncovers an important flaw in neoclassical economic theory.