Saturation point

economic-dictionary

The saturation point is the level of consumption where the consumer does not obtain utility and the additional units that he obtains are indifferent or harmful.

At saturation point, no increase in demand is expected as consumers do not want additional units. These are of no use to them or can even damage them. Thus, for example, a consumer may find that his cake saturation point is 4 units, the fourth unit no longer produces additional utility, and a fifth unit could cause discomfort.

Consumer theory

Saturation point characteristics

The main characteristics of the saturation point are:

  • The marginal utility obtained by the consumer is zero.
  • In the case of a market in saturation point, an increase in demand is not expected unless new customers appear in the market or replacement due to obsolescence.
  • Consuming more units of the product or service from this point on can be indifferent to the consumer or even harmful.

How to find the saturation point

The saturation point depends on consumer preferences. Its existence is derived from the so-called "Law of diminishing marginal utility", which indicates that the additional units of consumption report quantities of diminishing utility. When the additional unit reports zero utility, we have reached the saturation point.

The law of diminishing marginal utility and the saturation point have a logical explanation. The consumer strongly values ​​the first consumer units, but once he acquires more, his utility declines. This behavior can be observed in the consumption of various goods and services. Suppose, for example, that a consumer is very thirsty, and the first bottle of water will be very valuable since it is very useful to him by quenching his thirst (in fact he will be willing to pay more for it), but additional units no longer have as much value, because your urgent need has already been met.

In the following graph we can see the saturation point. As we can see, the marginal utility curve is decreasing until the saturation point where it becomes negative. Meanwhile, the total utility curve is increasing (since positive marginal utilities are added) until the saturation point, when it begins to decline.

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