Law of diminishing marginal utility
- 1. Law of Diminishing Marginal Utility P.PANDIDURAI M.A., M.PHIL., ASSISTANT PROFESSOR PROF.DHANAPALAN COLLEGE OF ARTS AND SCIENCE
- 2. Introduction Definition of the Law: "Other things remaining the same when a person takes successive units of a commodity, the marginal utility diminishes constantly". The marginal utility of a commodity diminishes at the consumer gets larger quantities of it. According to Samuelson, “As the amount consumed of a good increases, the marginal utility of the good tends to decrease.”
- 3. Utility Total Utility: Total utility refers to the entire amount of satisfaction obtained from consuming various quantities of a commodity. Marginal Utility: Marginal utility is the addition made to total utility by consuming one more unit of commodity.
- 4. ASSUMPTION 1. The consumer who is consuming the goods should be knowledgeable to consume every unit of goods. 2. The goods which are to be consumed should be equal in size and shape. 3. Consumer should consume the goods without time gap. 4. The consumer’s income, preference, taste and fashion should not be changed while consuming the goods. 5. utility should be measured in countable units or cardinal numbers. 6. As we know that money is the measuring rod of utility, being so, marginal utility of money should remain constant during consumption of the goods 7. income of the consumer and the price of goods and services remains unchanged during the period of consumption
- 5. Schedule of Law of Diminishing Marginal Utility: Units Total Utility Marginal Utility 1st glass 20 20 2nd glass 32 12 3rd glass 40 8 4th glass 42 2 5th glass 42 0 6th glass 39 -3 Schedule of Law of Diminishing Marginal Utility:
- 6. Diagram
- 7. Expalnation From the above table, it is clear that in a given span of time, the first glass of water to a thirsty man gives 20 units of utility. When he takes second glass of water, the marginal utility goes on down to 12 units; When he consumes fifth glass of water, the marginal utility drops down to zero and if the consumption of water is forced further from this point, the utility changes into disutility (-3).
- 8. Criticism Opposite Of Assumption
- 10. ThAnK yOu