Increasing at a decreasing rate

   To the right is a graph of a positive, nonlinear relationship that is increasing at a decreasing rate. We show the slope at three different points. As Q increases, TU increases, but it should be clear that the rate of increase is getting smaller the greater the value of Q (the farther to the right on the graph). The slope of the graph at any given point is the rate of increase in TU due to a one unit increase in Q. At point A, where Q is small, the curve is relatively steep with a slope of 4/3. At point B the curve is becoming flatter and the slope is 1/3, while at point C the curve is flatter still with a slope of only 1/8.

   This particular graph is a graph of Total Utility and, at each point, the slope of the curve can be interpreted as Marginal Utility, which means that Marginal Utility is decreasing as Q increases.8

8 Don't worry if this second paragraph doesn't make much sense right now, though if it still doesn't make sense after you've covered Chapter 4, feel free to worry.

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