The Law of Diminishing Marginal Utility
The concept of distributive efficiency is based on the law of diminishing marginal utility. According to this economic law, as a person gets more to spend, he will buy things that give him less and less utility. For example, if a person is given a gift certificate for a music download (and has no way to resell the certificate), he will use the gift certificate to purchase the song he will enjoy the most. If he is given another, we will buy his second favorite song. The process continues as long as the man keeps getting certificates for downloads. Each additional song the person buys is slightly less desirable than the one before.
Read more about this topic: Distributive Efficiency
Famous quotes containing the words the law, law, diminishing, marginal and/or utility:
“The law of nature is alternation for evermore. Each electrical state superinduces the opposite. The soul environs itself with friends, that it may enter into a grander self-acquaintance or solitude; and it goes alone for a season, that it may exalt its conversation or society.”
—Ralph Waldo Emerson (1803–1882)
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—Václav Havel (b. 1936)
“From the point of view of the pharmaceutical industry, the AIDS problem has already been solved. After all, we already have a drug which can be sold at the incredible price of $8,000 an annual dose, and which has the added virtue of not diminishing the market by actually curing anyone.”
—Barbara Ehrenreich (b. 1941)
“If the individual, or heretic, gets hold of some essential truth, or sees some error in the system being practised, he commits so many marginal errors himself that he is worn out before he can establish his point.”
—Ezra Pound (1885–1972)
“Moral sensibilities are nowadays at such cross-purposes that to one man a morality is proved by its utility, while to another its utility refutes it.”
—Friedrich Nietzsche (1844–1900)