A description of the relationship between total utility and marginal utility dwells on the level of satisfaction of a specific type of service or goods consumed by a person over a period of time in different units. Total utility refers to the total amounts of units consumed by a customer from different units of the specific product. On the other hand, marginal utility refers to the level of satisfaction achieved through the consumption of an additional unit of a product or good (Alvino, Constantinides & Franco, 2018). For instance, using an illustration of mangoes, the consumption of every piece derives another level of satisfaction by each additional unit, and this outlines the concept of marginal utility. Total utility is realized upon the consumption of the highest number mangoes based on the consumers’ level of satisfaction.
Negative marginal utility is conceptualized based on the fact that at some point, a customer would be badly off upon the consumption of an extra unit of a product or a commodity. The most idealistic illustration would be food, say bread. In this case, it is evident that a customer could be very hungry, and the consumption of the first slices of bread would show a higher marginal utility. The second and subsequent consumption of the slices of bread would have less marginal utility (Castro & Araujo, 2019). The phenomenon that leads to a decrease in marginal utility or rather negative utility is perceived as diminishing marginal utility. The consumption of additional slices of bread would not give a customer any pleasure, and this demystifies the ideology of negative marginal utility. Ideally, at some point in the process of consuming the bread, a customer would feel full and satisfied, and this means additional consumption would make the customer sick. Hence, the last slice is perceived to have negative marginal utility since its consumption makes a customer sick.
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Given the context of the diamond-water paradox, it is quite imperative to note that diamond is more expensive than water-based on the value of the product, utility theory, and consumer behavior. In as much as water could be useful, it is not a valuable commodity for exchange. Hence, the price of a diamond or rather the value of exchanging diamonds is determined by its marginal utility. The value or the usefulness of water is determined by the phenomenon of total utility (Farah, 2018). Furthermore, it is quite paradoxical that water saves lives, but its value is lower than the cost of a diamond. The more a person takes higher units of water, the quicker a person achieves satisfaction. Conversely, the more a person would access infinite quantities of the diamond, the lesser total utility shall be achieved. It is quite imperative to note that total utility determines the value in use, like in the case of water, and marginal utility determines the cost of the exchange of a particular commodity like in the case of a diamond.
The law of diminishing marginal utility affirms that every item, product, or a commodity consumed by a person the level of satisfaction reduces through additional consumption of extra units of the same product. For instance, a person could buy a bottle of soda, say Coca-Cola, after a while, and through additional units of the same drink, the same person may buy less of the product since the level of satisfaction is diminishing (Lin & Peng, 2019). This person will opt for other products if she or he wishes to spend more based on the phenomenon of diminishing marginal utility. The law of diminishing marginal utility is evaluated based on the fact that whenever a consumer is given a chance to interact with an economical product or rather a commodity, such as a consumer would behave in a way that shows how he or she values the product. The first consumption proves to be very valuable to the customer than the subsequent units of the product. However, there exist exceptions and limitations in the evaluation of the law of diminishing marginal utility. For instance, certain goods that fall under the category of electronics such as televisions and refrigerators do not obey the law of diminishing marginal utility (Alvino, Constantinides & Franco, 2018). The existence of such goods explains the inapplicability of the law of diminishing marginal utility based on the fact that their consumption is not constant in nature.
Fundamentally, the explanation of the law of diminishing marginal utility in the case of water-diamond paradox is conceptualized on the basis of their value of exchange and usefulness of the commodity to the consumers. Utility could not be used as a platform for determining the price of a commodity since diamond is less useful but very expensive. On the same note, the total utility of water is higher based on the huge influx of supply and availability. In contrast, the total utility for diamond is lower since diamonds are scarce and a consumer would need more of the irrespective of the quantity (Castro & Araujo, 2019). The law of diminishing marginal utility outlines the understanding of water-diamond paradox through the consideration of maximizing behaviors of consumers. The law of diminishing marginal utility explains why a consumer realizes high total utility in the case of water usage and a high marginal utility in realizing the value of exchange of the value of diamond with other commodities.
References
Alvino, L., Constantinides, E., & Franco, M. (2018). Towards a better understanding of consumer behavior: marginal utility as a parameter in neuromarketing research. International Journal of Marketing Studies , 10 (1), 90-106.
Castro, L., & Araujo, A. (2019). Marginal Utility & its Diminishing Methods. International Journal of Tax Economics and Management .
Farah, M. (2018). Why Are Diamonds More Expensive Than Water? | JSTOR Daily . JSTOR Daily. https://daily.jstor.org/diamonds-expensive-water/ .
Lin, C. C., & Peng, S. S. (2019). The role of diminishing marginal utility in the ordinal and cardinal utility theories. Australian Economic Papers , 58 (3), 233-246.
