utility from each additional unit becomes lower. Compare two different choices between points that all provide

Lilly an equal amount of utility along the indifference curve Um: the choice between A and B, and between C

and D. In both choices, Lilly consumes one more book, but between A and B her consumption of doughnuts

falls by 36 (from 120 to 84) and between C and D it falls by only five (from 40 to 35). The reason for this

difference is that points A and C are different starting points, and thus have different implications for marginal

utility. At point A, Lilly has few books and many doughnuts. Thus, her marginal utility from an extra book will

be relatively high while the marginal utility of additional doughnuts is relatively low—so on the margin, it will

take a relatively large number of doughnuts to offset the utility from the marginal book. At point C, however,

Lilly has many books and few doughnuts. From this starting point, her marginal utility gained from extra
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