Economics

Law of Diminishing Marginal Utility : Definition, Assumption ,and Exception

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In this article we will study about Diminishing Marginal Utility. We will also discuss Law of Diminishing Marginal Utility : Definition, Assumption ,and Exception.

Law of Diminishing Marginal Utility

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According to the Law of Diminishing Marginal Utility, Other things remaining same, this law states that when consumer is goes on consuming more and more units of a commodity, Marginal utility derived from each successive unit go on decline.

According to Marshall, “The additional benefit a person derives from a given increase of his stock of anything diminishes with the growth of the stock that he already has”.

According to Paul A. Samuelson,  “As the amount consumed of a good increases, the marginal utility of the good leads to decrease”.

Explanation

This law is easy to understand and important to understand it, it is basically concept of microeconomics. It means when a consumer consumes 2 units of a commodity and get satisfaction of 9, when he will consume 4 units get satisfaction of 8, so this law states when more and more units are consumed marginal utility tend to decline.

Also Read :Meaning of Total utility and marginal Utility and the relationship between Total Utility and Marginal Utility.

Assumptions of Law

Law of Diminishing Marginal Utility : Definition, Assumption ,and Exception

  1. Continuous consumption of commodity.
  2. Only standard units of the commodity are consumed.
  3. Utility of commodity should b measured in quantitative term like 2,4,6, etc.
  4. Consumer should be rational.
  5. Commodity is in homogeneous characters.
  6. Taste of consumer remains same.
  7. Income of consumer remains same.
  8. No change in fashion.
  9. Price of substitute goods doesn’t change.

Also Read :Concept of Utility, Total Utility and Marginal Utility.

Schedule and Diagram

Let we assume that when a consumer consumes more and more units of a commodity the marginal utility derived from it started decline.

Units of CommodityMarginal Utility  Total Utility
  1st unit

2nd unit

3rd unit

4th unit

5th unit

6th unit

           8

6

4

2

0

2

             08

14

18

20

20

18

 

In this figure , when the consumer consumes 1 unit he will get marginal utility of 8, when he consumes more unit 1 to 2 units marginal utility goes to 6 , MU started decline, when he consume 3 units marginal utility decreases to 4. So this diagram shows when consumer consumes more and more units marginal utility derived tends to decline.

Exceptions of Law

  1. No dissimilar units are consumed.
  2. No unreasonable quantity of commodity consumed.
  3. No change in taste of consumer.
  4. No change in time of consumption.
  5.  No change in Income of the person.

So we will discuss Law of Diminishing Marginal Utility : Definition, Assumption ,and Exception. For any query comment below.

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