Three Fundamental Concepts of Economics
1. Human wants.—Two characteristics of human wants possess great importance in their bearing upon the production and consumption of wealth.
First, there seems to be no limit to the number of wants of which a human being is capable. This is one reason why most people find saving so difcult; any growth of income is speedily outdistanced by the growth of wants. This characteristic also ex-plains why a general overproduction of wealth is impossible; there may be too much of one thing but not too much of all things. It also accounts for the al-most infinite variety of goods found in the markets of any modern city.
Second, the continued gratification of any single want finally leads to satiety and may become even tedious and irksome. It is a well-known fact of everyday life that any pleasure loses its zest if indulged in too long.
2. Law of diminishing utility.—The fact that we get less and less satisfaction out of the continued gratification of any single want is so important that it is laid down as a fundamental proposition and is known as the law of diminishing utility. It may be stated as follows: The intensity of any utility, or of a man 's desire for any good, tends to decline as he consumes successive units of it.
This law doubtless has both a physiological and a psychological basis. Sports weary certain muscles and finally cease to give pleasure. The hungry man gets great satisfaction out of the first few minutes of his dinner, but his enjoyment of the meal soon begins to decline. A man who is already the owner of a silk hat, is not profusely grateful if a friend sends him a second silk hat as a Christmas gift, and if he gets a third on his next birthday he will probably look at it gloomily and wonder if he has some friend or relative whose head it will fit, for to him it is only a nuisance.
This principle of diminishing utility applies with varying force in the case of different articles and different men. In the case of the silk hat, the utility
First, there seems to be no limit to the number of wants of which a human being is capable. This is one reason why most people find saving so difcult; any growth of income is speedily outdistanced by the growth of wants. This characteristic also ex-plains why a general overproduction of wealth is impossible; there may be too much of one thing but not too much of all things. It also accounts for the al-most infinite variety of goods found in the markets of any modern city.
Second, the continued gratification of any single want finally leads to satiety and may become even tedious and irksome. It is a well-known fact of everyday life that any pleasure loses its zest if indulged in too long.
2. Law of diminishing utility.—The fact that we get less and less satisfaction out of the continued gratification of any single want is so important that it is laid down as a fundamental proposition and is known as the law of diminishing utility. It may be stated as follows: The intensity of any utility, or of a man 's desire for any good, tends to decline as he consumes successive units of it.
This law doubtless has both a physiological and a psychological basis. Sports weary certain muscles and finally cease to give pleasure. The hungry man gets great satisfaction out of the first few minutes of his dinner, but his enjoyment of the meal soon begins to decline. A man who is already the owner of a silk hat, is not profusely grateful if a friend sends him a second silk hat as a Christmas gift, and if he gets a third on his next birthday he will probably look at it gloomily and wonder if he has some friend or relative whose head it will fit, for to him it is only a nuisance.
This principle of diminishing utility applies with varying force in the case of different articles and different men. In the case of the silk hat, the utility