Lithium graphite intercalation compound (Li-GIC) has potential plateaus depending on its staging in Li/Li-GIC cells. It is believed that the entropy of each stage is different depending on the total number of states created by the inserted Li+ and electrons in Li-GIC. On this basis, the entropy change with Li insertion has been calculated and the potential, using the reaction Gibbs function, has been estimated. The entropy term in the usual potential equation diverges for Li vacant and Li full GICs. The equation was improved and had finite values for these GICs depending on the mean size of the crystallites in the GIG. By the introduction of the intercalation pressure to our model, we confirmed that LI-GIC is unstable and decomposes into Li-poor and Li-rich phases. The potential was calculated using the entropy term for Li full GIG. The result agreed well with the experimental value. The entropy term contribution was very large for the potential difference of each plateau.