Marginal benefit

Marginal benefit is the incremental increase in the benefit to a consumer caused by the consumption of one additional unit of a good or service. As a consumer’s consumption level increases, the marginal benefit tends to decrease (which is called diminishing marginal utility), because the incremental amount of satisfaction associated with the additional consumption declines. Thus, the marginal benefit experienced by a consumer is highest for the first unit of consumption, and declines thereafter.

For example, a consumer is willing to pay $5 for an ice cream, so the marginal benefit of consuming the ice cream is $5. However, the consumer may be substantially less willing to purchase additional ice cream at that price – only a $2 expenditure will tempt the person to buy another one. If so, the marginal benefit has declined from $5 to $2 over just one extra unit of ice cream. Thus, the marginal benefit declines as the consumer's level of consumption increases.