The Law of Marginal Utility Is a Statement About the Inverse (Opposite) Relationship Between the Total Amount Possessed of a Given Good and the Value Attached to a Single Unit of the Total Stock of That Good

The classic statement of the Law of Marginal Utility is by Boehm-Bawerk in the form of a parable about a small farmer who had planted enough seeds to harvest five sacks of grain. Boehm used this parable to illustrate the following principle: for any given good, there is an inverse (opposite) relationship between (a) the quantity (number of units) that we possess of the given good and (b) the subjective value or importance attached to any single unit of that good (called the "marginal utility"), provided other things (subjective preferences, personal income, etc.) remain the same. In other words, the Law of Marginal Utility is a statement about the inverse relationship between (a) the total amount possessed of a given good, on the one hand, and (b) the value attached to a single unit of the total stock of that good.

In a moment, this principle will be illustrated by means of Boehm's parable, but first we should add the two corollaries that follow from the Law of MU. The first is the Law of Diminishing MU, which runs as follows: The greater the quantity possessed of any given good, the lower is the subjective value attached to a unit of the given good (the MU), other things being the same. The second is the Law of Increasing MU: The smaller the quantity possessed, the higher the subjective value attached to a unit of the given good (the MU), other things being the same. The best way to see this is through Boehm's parable.

--Milton M. Shapiro, Foundations of the Market Price System (Lanham, MD: University Press of America, 1985), 90-91.