Sunday, January 26, 2014

The Law of Diminishing Marginal Utility: Is there such thing as "more" satisfied?




In the field of Economics, the Law of Diminishing Marginal Utility is a topic I am interested in.I'd like to call it the Law of Diminishing Satisfaction.

  Investopedia defines this as a law of economics stating that as a person increases consumption of a product - while keeping consumption of other products constant - there is a decline in the marginal utility that person derives from consuming each additional unit of that product.



Don't be fooled by the all-you-can eat buffet restaurants, they are using this law to their advantage. They know that people are willing to pay a higher amount,than they would if they pay per food,on the thought of eating infinite amount of food. Buffet owners also know that  consumer can't eat more than they can. They are laughing their way to the banks. I don't hate buffet restaurants at all, it's just when you know how stuffs work, you get a better understanding on how it's done and you would know if you are really saving money or if it is just another marketing scheme.

I'll give you an example of how this law happens to our daily lives.

Binignit in Cebuano
Ginataan in Tagalog
I was craving for some hot binignit (glutinous rice porridge)lately because of the subzero temperature I have been experiencing in my area. Last time I made one was last 2 Christmases ago and  I decided to make a whole pot this weekend in the hope of satisfying my cravings. While was shopping for the ingredients, preparing all of it, rolling the glutinous ball and all, I was excited as heck. An hour later, this yummy thing was ready. I excitedly put one serving in a bowl and ahhhhhhhh, yummy indeed! The second bowl was equally yummy. The third bowl was yummy as well but when I get to my 5th bowl, I realized  that with every spoonful I take, the less satisfied I get- the more I eat, the more my satisfaction diminishes. I didn't enjoy the 5th bowl as much as I enjoyed the first bowl and if I eat another bowl, I would definitely get sick and if I get sick, where's the satisfaction that I was looking for in the first place?

You think more money can make you happy. Why studies point that wealthiest nations are not the happiest? We keep telling ourselves if only we have more money we would be happy not knowing  the more money is not the solution but knowing that money is just a tool to meet our basic needs (food, shelter, clothing). When we reach to the point of meeting our basic needs, with a little wiggle room to be comfortable, the utility for money begins to diminish and yet, we keep telling ourselves that we need more. You might say "If only I'll have a car then I will be happy" not knowing by the time you get a car, you would move on to the next "If only I have this and that, then I will be happy". Satisfaction is indeed elusive coz we move on from one want to another want.

No matter what we do, if we don't know how much enough is, then we would be like an experimental rat in a maze, going in circles wasting our time on stuffs that aren't worth it. Why don't we stop and appreciate the things we have? The more we savor the stuffs we have, rather than drooling over stuffs we can't afford,the more we are going to increase the worth of things around us. 

Stop and smell the flower. Savor it.

15 comments:

  1. Love ur post!!! At ang sarap ng ginataan........

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    1. Thanks, yah! yummy talaga. Nothing beats filipino food! :)

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  2. Good point! People tend to focus on something they don't have and miss the chance to appreciate what they have. My point: We don't need to have all the (expensive or not) things just to live a happy life.

    "The best things in life are free; the second best are expensive." -Coco Chanel

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  3. Nice quote! Thanks for dropping by. :)

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  4. Korek! :) You said it all, sis.

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  5. Mmmm....binignit!

    And your post isn't bad too... ;-)

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    1. Binignit indeed!! And you added one word to you bisaya vocabulary. Oh wait, you understand bisaya, you have relatives in Cebu!

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    2. Yup, loud and proud bisdak here :)

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  6. Economist are right on the concept of marginal utility. I read a research somewhere that if a person reaches P200,000 earning mark, any increment on the salary would not add to that person's happiness level.

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    1. I read that article too but the price was in dollars. I think it was 75,000 dollars annually. Nice to know the peso equivalent.

      Thanks for dropping by:)

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  7. Very true. I also always say that the fried chicken of a billionaire tastes the same as the fried chicken of any ordinary person :)

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