I hope everyone is having a lovely Easter weekend. I certainly had a good Easter Sunday – I spent the morning at a golf driving range, followed by a carvery pub lunch, then to a church service in the evening, after which I chaperoned the youth group while we all watched the very funny and silly Blades of Glory.
Most importantly, no doubt along with many of you, dear readers, I stuffed my face full of chocolate Easter eggs.
It just so happens that the stuffing of one’s face with chocolate Easter eggs affords a wonderful example of everyday economics. If you’re one of the cool kids who has taken time to read my latest economics solutions, you will have come across the concept of the law of diminishing marginal utility*.
We get a huge amount of pleasure (utility) from eating that first Easter egg – it tastes yummy and when else can you eat chocolate first thing in the morning without feeling guilty? The next (marginal) Easter egg still tastes so good – but you start to berate yourself for being such a pig, and it doesn’t taste quite so great. After the third, you try to remind yourself that other food groups exist, and it might be an idea to try them at some point in the day – you enjoy it even less than the third. When you’re still stuffing your face at 11pm, you worry you may be eating too much chocolate***. The pleasure from eating each additional Easter egg is diminishing.
This goes for most things – it seems a fact of our psychology that we get most pleasure the first time we do or use something.
Who still remembers their second kiss?
that property in any object… to produce benefit, advantage, pleasure, good, or happiness… or… to prevent the happening of mischief, pain, evil, or unhappiness
Economists define utility as the ability of something to satisfy needs or wants.
We buy clothes, cars, chocolate, and computer games to satisfy our needs and wants, or in economese, to gain utility.
Marginal: Marginal means ‘additional’ or ‘extra’ – so marginal utility is the utility you gain from consuming one additional thing – the pleasure you get from buying one extra car or chocolate – as opposed to total utility, which is the pleasure you get from all your purchases of cars or chocolate.
Law of Diminishing Marginal Utility states that each identical extra unit of something you consume gives you less marginal utility. The second Easter egg doesn’t give as much utility as the first, although it does give some utility and so increases your total utility.
**If you click on ‘Bentham‘ (or here) you’ll see a picture of the man’s preserved body still on display in a cabinet in the South Cloisters of University College London, after he donated it in his will. His ‘head’ is a wax work, the real, half-rotted one sits at his feet.
*** You may disagree