You don't need to have studied economics to be familiar with the law of diminishing marginal utility and the idea of consumer surplus. The first has to do with the benefit consumers get from their purchases. The second involves the prices people pay vs. what they're willing to pay. These intertwined concepts play a key role in pricing decisions.
To an economist, "utility" refers to the benefit or satisfaction a consumer gets from using a good or service. Prices and utility are intertwined. If you sell hot dogs for, say, $2, customers will buy one only if they think they'll get $2 worth of utility from it. And that depends on how hungry they are at the moment, how much they like hot dogs, their alternatives and any number of other factors. "Marginal utility" is the additional benefit one gets from consuming one additional unit of that good or service. Whether customers will pay $2 for a second hot dog depends on whether the additional benefit they'll realize is worth $2 to them.
The law of diminishing marginal utility says that as a consumer uses more and more of something, each additional unit provides less benefit. In other words, the marginal utility gets smaller. In some cases, it may be only a bit smaller: If someone's really hungry, he might gladly pay $2 for a second hot dog. In others, the marginal utility might drop sharply: Think about how much use you'd have for a second or third vacuum cleaner. As consumers' marginal utility declines, the price they're willing to pay declines, too.
If you're selling hot dogs for $2, then any customer who thinks a hot dog provides more than $2 worth of utility is getting a bargain. There will be some who would be willing to pay $2.25, others who would pay $2.50 and so on. The difference between what a consumer pays for something and what he'd be willing to pay is the "consumer surplus." When a business sets a price, it's trying to strike a balance. If it sets the price too low, it leaves too much consumer surplus unclaimed. But trying to capture that consumer surplus could lead it to set the price too high -- higher than the utility that potential customers think they would get from the product.
As marginal utility declines, so does consumer surplus. Say a customer who's willing to pay $3 for a hot dog buys one for $2. That's $1 worth of consumer surplus. Next time around, he's not as hungry; he'd be willing to pay maybe $2.50. His marginal utility has gone down, and as a result his consumer surplus has dropped. Perhaps he'd be willing to pay exactly $2 for a third hot dog. He's reached the point of marginal utility, and there's no consumer surplus at all. The only way to sell that customer a fourth hot dog -- if indeed you can sell him one at all -- is to drop the price low enough that it at least matches his marginal utility.