Non-linear Preferences

Non-linear preferences refer to situations where the consumer's satisfaction or utility does not increase in a straight, proportional way with additional consumption of a good or service. Instead, the value gained from each extra unit varies—sometimes diminishing as consumption grows (diminishing marginal utility) or increasing at an increasing rate (convex preferences). These preferences reflect realistic behaviors, showing that people might value initial units highly but gain less from additional units later, or vice versa. Non-linear preferences are important in understanding complex decision-making and in designing optimal consumption choices.