Marginal Utility Theory

Marginal Utility Theory explains how people make choices based on the additional satisfaction they get from consuming one more unit of a good or service. Typically, the more you have of something, the less extra enjoyment you get from each additional unit—this is called diminishing marginal utility. For example, the first slice of pizza makes you very happy, but the fifth slice brings less extra pleasure. This concept helps explain consumer behavior and how people decide what to buy, balancing the utility gained against the cost to maximize overall satisfaction.