The principle of diminishing marginal satisfaction helps to explain why people increase their rate of savings as their incomes rise.

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The principle of diminishing marginal satisfaction, also known as the law of diminishing marginal utility, states that as a person consumes more of a good or service, the additional satisfaction or utility derived from each additional unit decreases. This means that as a person's income rises, they may have more money to spend, but the additional satisfaction gained from each additional purchase decreases. Therefore, people may choose to increase their rate of savings as their income rises because they have a decreasing marginal satisfaction from additional consumption.

The Principle of Diminishing Marginal Satisfaction Helps to Explain Why