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Law of Diminishing Marginal Utility

I-am-a-panda
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9/17/2010 4:32:02 PM
Posted: 6 years ago
Economics Thread, all non-economics n00bs GTFO.

I have a question about Diminishing MU. One of the assumptions is that it doesn't apply to addictive drugs and medicines. However, does this not also apply to education, seeing MU would actually increase as your education increased. Of course there is a point where you can't learn anything else, but that's over many, many years. Thoughts?
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LaissezFaire
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9/17/2010 4:48:29 PM
Posted: 6 years ago
At 9/17/2010 4:32:02 PM, I-am-a-panda wrote:
Economics Thread, all non-economics n00bs GTFO.

I have a question about Diminishing MU. One of the assumptions is that it doesn't apply to addictive drugs and medicines. However, does this not also apply to education, seeing MU would actually increase as your education increased. Of course there is a point where you can't learn anything else, but that's over many, many years. Thoughts?

I don't see how MU would increase as total education increased, but I can see why you might have made this mistake. Take high school vs. college, for example. Looking at average incomes of graduates and other statistics, one could conclude that the MU of college is higher than that of high school, even though they take the same amount of time, thus, the Law of MU doesn't apply to education. But you have to take into account not the marginal return on the amount of time spent, but rather, the marginal return on the amount of education received. If college provides more MU than high school, it is simply because one receives more education in college than in high school.

Obviously, the Law of MU holds for the rest of education. Education at the level of learning arithmetic and literacy clearly has more MU than at the high school level. And education at the college level clearly has more MU than at the grad school level, as the amount of education received per year in grad school is far more than in college, but the marginal returns per unit of education are much smaller (Sometimes even 0 for less valuable graduate degrees).
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I-am-a-panda
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9/17/2010 4:53:12 PM
Posted: 6 years ago
At 9/17/2010 4:48:29 PM, LaissezFaire wrote:
At 9/17/2010 4:32:02 PM, I-am-a-panda wrote:
Economics Thread, all non-economics n00bs GTFO.

I have a question about Diminishing MU. One of the assumptions is that it doesn't apply to addictive drugs and medicines. However, does this not also apply to education, seeing MU would actually increase as your education increased. Of course there is a point where you can't learn anything else, but that's over many, many years. Thoughts?

I don't see how MU would increase as total education increased, but I can see why you might have made this mistake. Take high school vs. college, for example. Looking at average incomes of graduates and other statistics, one could conclude that the MU of college is higher than that of high school, even though they take the same amount of time, thus, the Law of MU doesn't apply to education. But you have to take into account not the marginal return on the amount of time spent, but rather, the marginal return on the amount of education received. If college provides more MU than high school, it is simply because one receives more education in college than in high school.

Obviously, the Law of MU holds for the rest of education. Education at the level of learning arithmetic and literacy clearly has more MU than at the high school level. And education at the college level clearly has more MU than at the grad school level, as the amount of education received per year in grad school is far more than in college, but the marginal returns per unit of education are much smaller (Sometimes even 0 for less valuable graduate degrees).

I see. I suppose MU is also dependent on whether or not you actually are successful with the degree\ education you get which determine the educations utility.
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badger
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9/17/2010 4:55:55 PM
Posted: 6 years ago
At 9/17/2010 4:54:05 PM, badger wrote:
monkey's uncle?

marginal utility... whatever happened to that plan to think before i typed? 'twas a good plan too.
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Sieben
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9/17/2010 5:12:34 PM
Posted: 6 years ago
Dim MU holds for homogeneous goods... so lets say I have a gameboy and get 1 2 3 and 4 batteries. 1-3 don't allow me to do jack, but the fourth allows me to play. The goods are homogeneous in a superficial physical sense, but heterogeneous from the perspective of the user.

So in the case of drugs, I would argue the goods aren't homogeneous. In the case of education, the good is probably not homogeneous either, but it just so happens that there may be decreasing utility anyway.
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Caramel
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10/5/2010 8:26:23 AM
Posted: 6 years ago
Economics Thread, all non-economics n00bs GTFO.

*throws up hands in karate position*

I have a question about Diminishing MU. One of the assumptions is that it doesn't apply to addictive drugs and medicines.

At some point you're going to reach the point where the next dose doesn't give you the same utility... I can't even think of a hypothetical situation where this could be overridden.

However, does this not also apply to education, seeing MU would actually increase as your education increased. Of course there is a point where you can't learn anything else, but that's over many, many years. Thoughts?

Education does not increase as you advance, it decreases dramatically. In all respects. Think of an old fantasy RPG with experience points and "levels." It takes a lot longer (more input) to reach each new level... It also takes a lot more education at the doctorate level to make the same increase as in kindergarten, high school, etc.
no comment
djsherin
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10/5/2010 12:30:08 PM
Posted: 6 years ago
What about listening to a song a few times and liking it more each time? Or developing a taste for a food you previously didn't like after eating it a few times?
I-am-a-panda
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10/5/2010 12:44:21 PM
Posted: 6 years ago
At 10/5/2010 12:30:08 PM, djsherin wrote:
What about listening to a song a few times and liking it more each time? Or developing a taste for a food you previously didn't like after eating it a few times?

Addicting good. Besides, there's no law that the origin kicks in straight away, only after a certain point.
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Caramel
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10/6/2010 7:18:35 AM
Posted: 6 years ago
At 10/5/2010 12:30:08 PM, djsherin wrote:
What about listening to a song a few times and liking it more each time? Or developing a taste for a food you previously didn't like after eating it a few times?

Ok djsherin, I will put you in a room with one song playing over and over again and only let you eat one thing for a week straight. Then we will gaph you marginal utility over time and see if it goes up or down. You arer describing taste, not MU.
no comment
innomen
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10/6/2010 7:58:26 AM
Posted: 6 years ago
At 10/6/2010 7:18:35 AM, Caramel wrote:
At 10/5/2010 12:30:08 PM, djsherin wrote:
What about listening to a song a few times and liking it more each time? Or developing a taste for a food you previously didn't like after eating it a few times?

Ok djsherin, I will put you in a room with one song playing over and over again and only let you eat one thing for a week straight. Then we will gaph you marginal utility over time and see if it goes up or down. You arer describing taste, not MU.

I agree with Caramel in that there is a point of saturation in all things to be provided, but just different points at different times for different commodities.
djsherin
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10/6/2010 9:58:40 AM
Posted: 6 years ago
At 10/6/2010 7:18:35 AM, Caramel wrote:
At 10/5/2010 12:30:08 PM, djsherin wrote:
What about listening to a song a few times and liking it more each time? Or developing a taste for a food you previously didn't like after eating it a few times?

Ok djsherin, I will put you in a room with one song playing over and over again and only let you eat one thing for a week straight. Then we will gaph you marginal utility over time and see if it goes up or down. You arer describing taste, not MU.

It isn't necessary to put someone in a room like you're saying. I'm not denying that marginal utility generally holds, but there are cases in which the first unit of something is not as satisfactory as the second unit. I was merely seeing what others had to say about it.
I-am-a-panda
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10/6/2010 10:06:41 AM
Posted: 6 years ago
At 10/6/2010 9:58:40 AM, djsherin wrote:
At 10/6/2010 7:18:35 AM, Caramel wrote:
At 10/5/2010 12:30:08 PM, djsherin wrote:
What about listening to a song a few times and liking it more each time? Or developing a taste for a food you previously didn't like after eating it a few times?

Ok djsherin, I will put you in a room with one song playing over and over again and only let you eat one thing for a week straight. Then we will gaph you marginal utility over time and see if it goes up or down. You arer describing taste, not MU.

It isn't necessary to put someone in a room like you're saying. I'm not denying that marginal utility generally holds, but there are cases in which the first unit of something is not as satisfactory as the second unit. I was merely seeing what others had to say about it.

Nothing says the origin kicks in straight away.
Pizza. I have enormous respect for Pizza.
djsherin
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10/6/2010 10:14:18 AM
Posted: 6 years ago
At 10/5/2010 12:44:21 PM, I-am-a-panda wrote:
At 10/5/2010 12:30:08 PM, djsherin wrote:
What about listening to a song a few times and liking it more each time? Or developing a taste for a food you previously didn't like after eating it a few times?

Addicting good. Besides, there's no law that the origin kicks in straight away, only after a certain point.

But I wouldn't describe music as an addicting good, not like crack or ciggarettes (unless addicting goods are just defined as any good where marginal utility is increasing at first). It seems to me that there are cases, however few, where the nth+1 use of a good is better than the nth use. Like I said in my previous post, I'm not denying that the law of diminishing MU holds in most cases, I'm simply asking for clarity about the cases where it doesn't seem to hold.

It's not like it's a big deal either way to me. Don't take anything I say as argumentative just for the sake of being argumentative. I just like the discussion and I'm curious what others have to say about it. I'm an econ major so it's not like I've never heard of the law of diminishing MU lol.
Caramel
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10/6/2010 10:17:56 AM
Posted: 6 years ago
At 10/6/2010 9:58:40 AM, djsherin wrote:
At 10/6/2010 7:18:35 AM, Caramel wrote:
At 10/5/2010 12:30:08 PM, djsherin wrote:
What about listening to a song a few times and liking it more each time? Or developing a taste for a food you previously didn't like after eating it a few times?

Ok djsherin, I will put you in a room with one song playing over and over again and only let you eat one thing for a week straight. Then we will gaph you marginal utility over time and see if it goes up or down. You arer describing taste, not MU.

It isn't necessary to put someone in a room like you're saying. I'm not denying that marginal utility generally holds, but there are cases in which the first unit of something is not as satisfactory as the second unit. I was merely seeing what others had to say about it.

I use extremes because they emphasize points better... I personally can't think of a situation in which MU doesn't hold. In your example, you are describing how someone's tastes develop as they try new things. This is not applicable to MU at all. MU has to do with increasing supply and then measuring how many "utils" society can gain from the extra supply. Again, it is difficult if not impossible to find a situation in which you jack up the supply of something and can observe that people derive more utility from the 75th pair of sneakers, for example, than the first. Even in your example with the music or food, you aren't deriving more utility from extra supply; you are essentially enjoying the "first" use again in a different time period. Consider the sneakers example again; you could get a whole lot more running done in the second pair 6 months from now when you're a better athlete. This doesn't mean that "more is better," it means that you have consumed your first use and have moved back to zero, and are now going to use your first use again. Explaining this in this form is really awkward; this is better understood from a ground-up approach to basic supply and demand.
no comment
I-am-a-panda
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10/6/2010 10:23:21 AM
Posted: 6 years ago
At 10/6/2010 10:14:18 AM, djsherin wrote:
At 10/5/2010 12:44:21 PM, I-am-a-panda wrote:
At 10/5/2010 12:30:08 PM, djsherin wrote:
What about listening to a song a few times and liking it more each time? Or developing a taste for a food you previously didn't like after eating it a few times?

Addicting good. Besides, there's no law that the origin kicks in straight away, only after a certain point.

But I wouldn't describe music as an addicting good, not like crack or ciggarettes (unless addicting goods are just defined as any good where marginal utility is increasing at first). It seems to me that there are cases, however few, where the nth+1 use of a good is better than the nth use. Like I said in my previous post, I'm not denying that the law of diminishing MU holds in most cases, I'm simply asking for clarity about the cases where it doesn't seem to hold.

It's not like it's a big deal either way to me. Don't take anything I say as argumentative just for the sake of being argumentative. I just like the discussion and I'm curious what others have to say about it. I'm an econ major so it's not like I've never heard of the law of diminishing MU lol.

Well, it isn't an addicting good, but the origin does kick in after the consumption of the first unit, but the Law still holds up after a certain point.
Pizza. I have enormous respect for Pizza.
I-am-a-panda
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10/6/2010 10:23:41 AM
Posted: 6 years ago
At 10/6/2010 10:23:21 AM, I-am-a-panda wrote:
At 10/6/2010 10:14:18 AM, djsherin wrote:
At 10/5/2010 12:44:21 PM, I-am-a-panda wrote:
At 10/5/2010 12:30:08 PM, djsherin wrote:
What about listening to a song a few times and liking it more each time? Or developing a taste for a food you previously didn't like after eating it a few times?

Addicting good. Besides, there's no law that the origin kicks in straight away, only after a certain point.

But I wouldn't describe music as an addicting good, not like crack or ciggarettes (unless addicting goods are just defined as any good where marginal utility is increasing at first). It seems to me that there are cases, however few, where the nth+1 use of a good is better than the nth use. Like I said in my previous post, I'm not denying that the law of diminishing MU holds in most cases, I'm simply asking for clarity about the cases where it doesn't seem to hold.

It's not like it's a big deal either way to me. Don't take anything I say as argumentative just for the sake of being argumentative. I just like the discussion and I'm curious what others have to say about it. I'm an econ major so it's not like I've never heard of the law of diminishing MU lol.

Well, it isn't an addicting good, but the origin doesn't kick in after the consumption of the first unit, but the Law still holds up after a certain point.
Pizza. I have enormous respect for Pizza.
innomen
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10/6/2010 10:24:51 AM
Posted: 6 years ago
I don't think that the law denotes a straight line in the diminishing effect. Eventually there will be a compounded diminishing return, it just might not be at a consistent rate throughout utilization. It's actually every marketers dream to change this.
djsherin
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10/6/2010 10:24:56 AM
Posted: 6 years ago
At 10/6/2010 10:06:41 AM, I-am-a-panda wrote:
At 10/6/2010 9:58:40 AM, djsherin wrote:
At 10/6/2010 7:18:35 AM, Caramel wrote:
At 10/5/2010 12:30:08 PM, djsherin wrote:
What about listening to a song a few times and liking it more each time? Or developing a taste for a food you previously didn't like after eating it a few times?

Ok djsherin, I will put you in a room with one song playing over and over again and only let you eat one thing for a week straight. Then we will gaph you marginal utility over time and see if it goes up or down. You arer describing taste, not MU.

It isn't necessary to put someone in a room like you're saying. I'm not denying that marginal utility generally holds, but there are cases in which the first unit of something is not as satisfactory as the second unit. I was merely seeing what others had to say about it.

Nothing says the origin kicks in straight away.

If you're allowed to set the origin wherever you want, then it's basically saying the law of diminishing MU holds when MU is diminishing, right? That seems kind of redundant.
djsherin
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10/6/2010 10:28:23 AM
Posted: 6 years ago
At 10/6/2010 10:23:41 AM, I-am-a-panda wrote:
At 10/6/2010 10:23:21 AM, I-am-a-panda wrote:
At 10/6/2010 10:14:18 AM, djsherin wrote:
At 10/5/2010 12:44:21 PM, I-am-a-panda wrote:
At 10/5/2010 12:30:08 PM, djsherin wrote:
What about listening to a song a few times and liking it more each time? Or developing a taste for a food you previously didn't like after eating it a few times?

Addicting good. Besides, there's no law that the origin kicks in straight away, only after a certain point.

But I wouldn't describe music as an addicting good, not like crack or ciggarettes (unless addicting goods are just defined as any good where marginal utility is increasing at first). It seems to me that there are cases, however few, where the nth+1 use of a good is better than the nth use. Like I said in my previous post, I'm not denying that the law of diminishing MU holds in most cases, I'm simply asking for clarity about the cases where it doesn't seem to hold.

It's not like it's a big deal either way to me. Don't take anything I say as argumentative just for the sake of being argumentative. I just like the discussion and I'm curious what others have to say about it. I'm an econ major so it's not like I've never heard of the law of diminishing MU lol.

Well, it isn't an addicting good, but the origin doesn't kick in after the consumption of the first unit, but the Law still holds up after a certain point.

That makes sense, it just seems kind of strange to me that the origin can be placed wherever. What then would the explanation be for the increasing marginal utility one gets before the law "kicks in"?
I-am-a-panda
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10/6/2010 10:35:44 AM
Posted: 6 years ago
At 10/6/2010 10:28:23 AM, djsherin wrote:
At 10/6/2010 10:23:41 AM, I-am-a-panda wrote:
At 10/6/2010 10:23:21 AM, I-am-a-panda wrote:
At 10/6/2010 10:14:18 AM, djsherin wrote:
At 10/5/2010 12:44:21 PM, I-am-a-panda wrote:
At 10/5/2010 12:30:08 PM, djsherin wrote:
What about listening to a song a few times and liking it more each time? Or developing a taste for a food you previously didn't like after eating it a few times?

Addicting good. Besides, there's no law that the origin kicks in straight away, only after a certain point.

But I wouldn't describe music as an addicting good, not like crack or ciggarettes (unless addicting goods are just defined as any good where marginal utility is increasing at first). It seems to me that there are cases, however few, where the nth+1 use of a good is better than the nth use. Like I said in my previous post, I'm not denying that the law of diminishing MU holds in most cases, I'm simply asking for clarity about the cases where it doesn't seem to hold.

It's not like it's a big deal either way to me. Don't take anything I say as argumentative just for the sake of being argumentative. I just like the discussion and I'm curious what others have to say about it. I'm an econ major so it's not like I've never heard of the law of diminishing MU lol.

Well, it isn't an addicting good, but the origin doesn't kick in after the consumption of the first unit, but the Law still holds up after a certain point.

That makes sense, it just seems kind of strange to me that the origin can be placed wherever. What then would the explanation be for the increasing marginal utility one gets before the law "kicks in"?

There's no law against it. The law of Diminishing MU just stated eventually the MU decreases.

Another theory is that given you haven't listened to the song is a long time, you've used up the goods utility, and you start from scratch again. Thus you start all over again.
Pizza. I have enormous respect for Pizza.
Reasoning
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10/6/2010 11:08:29 PM
Posted: 6 years ago
At 9/17/2010 4:32:02 PM, I-am-a-panda wrote:
Economics Thread, all non-economics n00bs GTFO.

I have a question about Diminishing MU. One of the assumptions is that it doesn't apply to addictive drugs and medicines. However, does this not also apply to education, seeing MU would actually increase as your education increased. Of course there is a point where you can't learn anything else, but that's over many, many years. Thoughts?

The Law of Diminishing Marginal Utility applies to all homogeneous goods that are equally capable of rendering the same service to the actor.
"What we really ought to ask the liberal, before we even begin addressing his agenda, is this: In what kind of society would he be a conservative?" - Joseph Sobran
mongoose
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10/7/2010 1:42:30 PM
Posted: 6 years ago
Think about it this way: each bit of education is different than the rest. To apply the law, you must be talking about learning the same thing over and over. Clearly, it doesn't help as much the second or third time you're told that 2 + 2 = 4.
It is odd when one's capacity for compassion is measured not in what he is willing to do by his own time, effort, and property, but what he will force others to do with their own property instead.
Reasoning
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10/7/2010 5:05:12 PM
Posted: 6 years ago
At 10/7/2010 1:42:30 PM, mongoose wrote:
Think about it this way: each bit of education is different than the rest. To apply the law, you must be talking about learning the same thing over and over. Clearly, it doesn't help as much the second or third time you're told that 2 + 2 = 4.

This.
"What we really ought to ask the liberal, before we even begin addressing his agenda, is this: In what kind of society would he be a conservative?" - Joseph Sobran