Microeconomics Product or Service

Question: Discuss about theMicroeconomicsfor Product or Service. Answer: Introduction Utility refers to the amount of satisfaction that an individual derives by consuming a product or service. According to the law of diminishing marginal utility, the satisfaction level of the individual decreases with the increase in the units consumed of a product or service by using a limited amount of resource within a given point of time (Mankiw and Taylor, 2014). Two examples in which the law of diminishing marginal utility is applicable are presented herein below: Have lunch in restaurant: When I have a pizza in a restaurant, I will buy a particular amount of product to satisfy my hunger. Any amount of pizza more than the desired quantity will lead to negative utility. Buying water in hot summer: When I am thirsty and have a single source of water, I will be ready to pay a greater amount for the first glass of water as compared to the second and thereafter. After I quench my thirst, I will not pay further money to the water seller for any more glass of water. Hence, the law of diminishing marginal utility is applicable in both the cases (Salvatore and Salvatore, 2011). Now, the case in which the law of diminishing marginal utility fails for an individual is when a person buys a luxury product and has enough monetary backup to buy more products. For instance, a painting collector will buy more new paintings when the price of the product is high, irrespective of previously buying a painting within a particular period. Hence, the law of diminishing marginal utility is not applicable in the most of the cases of luxurious and historical products. References Mankiw, N. and Taylor, M. (2014). Microeconomics. 1st ed. Andover: Cengage Learning EMEA. Salvatore, D. and Salvatore, D. (2011). Microeconomics. 1st ed. New York: McGraw Hill.