Gemstones, as a kind of luxury goods, can bring people show-off and other effects, and the quantity is very small, so increasing the consumption of gemstones by one unit will bring great utility to consumers. That is to say, the marginal utility of gems is very large, and consumers are willing to spend more to purchase them.

Although water is an indispensable part of human life and brings extremely high utility to people, there is a lot of water in the world. Adding one unit of water will bring very little utility to people. , that is, the marginal utility of water is very low, so the price of water is also very low.

Price has nothing to do with total utility, but with marginal utility. Under the conditions that the consumer's income is fixed and the market prices of various commodities they face are given, in order to achieve the goal of maximizing utility, his expenditure must be allocated among various commodities so that the marginal utility of each commodity must be The ratio to its price is equal. Therefore, diamonds are of very little use and are expensive, while water, which is essential for life, is very cheap.

The principle of diminishing marginal returns, examples of its application in real society.

In production, spreading chemical fertilizers on farmland can increase crop yields. When the first 100 kilograms of chemical fertilizers are spread on an acre of farmland, the yield is increased the most. Spreading the second 100 kilograms of chemical fertilizers increases the yield. When the first 100 kilograms of chemical fertilizer are applied, the increased yield will not be as much as that of the first 100 kilograms of chemical fertilizer. When the third 100 kilograms of chemical fertilizer are spread, the increased yield will be even less or even reduced. As the amount of chemical fertilizers increased, the yield increase effect will become more and more obvious. Low.

In scientific research, such as psychology, studying the rules of human memory, it is found that the forgetting rate decreases as the number of times a person memorizes increases. The more times a person memorizes, the less likely it is to forget. It is very consistent with the law of diminishing marginal returns.

In social management, after a policy is promulgated, the management or normative effect is often obvious at first, but as time goes by, the function of this policy becomes smaller and smaller. To meet the needs of social management, the management normative restriction or guiding effect of policies is constantly weakening. This is the main reason why constitutions, regulations and statutes need to be adjusted and updated at regular intervals.