Marginal willingness to pay, the amount a consumer is willing to pay for one more unit of a good, falls the more one consumes of a particular product or service. There are exceptions, like addictive substances and collectibles, but apart from these special cases, marginal willingness to pay falls as consumption increases. If it didn't each consumer would spend all her income on and consume only one product, whatever her favorite happened to be.

    Back to our example. Suppose a third pizza could be purchased each semester, how much would a third one be worth to our consumer, in other words, what would her marginal willingness to pay for a third pizza be? Suppose she would value it at $30, slightly less than her marginal willingness to pay for the first or second.

Copyright © 1995-2004 OnLineTexts.com, Inc. - All Rights Reserved