Suppose you assign 10 units of happiness to the first hamburger you eat at Burger King.

The second hamburger provides 12 units of happiness. -- Two hamburgers are better than one.

The third, however, provides only 8 units and the fourth, 5 units of happiness.

What is the marginal utility associated with the second hamburger. === MU = ČU = 2 units.

Where does the law of diminishing marginal utility begin to apply? At the third unit where the MU = negative 4 utility units.

Do you ever see businesses making use of this idea. YES. Suppose I advertise, “Buy one hamburger for the regular price, and get the second one for only $0.50. I know that the second hamburger does not have as much value to you as the first one because of the Law of Diminishing Marginal Utility.

Can you think of any cases where the Law of Diminishing Marginal Utility does not apply?