Presentation on diminishing marginal utility by rahul majumder,bba 2011-14,ilead

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  • Simply put, - the law of diminishing marginal utility means that the first u
  • Presentation on diminishing marginal utility by rahul majumder,bba 2011-14,ilead

    1. 1. Presentation on Law of Presented by Rahul Majumder 1
    2. 2. Law of Diminishing Marginal UtilityLaw Of Diminishing Marginal UtilityLawTable With The GraphAssumptions & Exceptions Of LawThank You 2
    3. 3. Definition* The law of diminishing marginal utility describes a familiar and fundamental tendency of human behavior.* “The law of diminishing marginal utility states that, “as a consumer consumes more and more units of a specific commodity, utility from the successive units goes on diminishing”. 3
    4. 4. a law of diminishing marginal utility MARGINAL UTILITY The consumption of various unit of commodity. TOTAL UTILITY(TU) The sum total of satisfaction which a consumer receives byconsuming the various unity of the commodity.(The more unit of a commodity he consumes, the greater will be histotal utility) 4
    5. 5. The concept of marginal utility grew out of attempts by economists to explain the determination of price.•Marginal utility can be defined as a measure of relative satisfactiongained or lost from an increase or decrease in the consumption ofthat good or service.•Examples –A motor vehicle or A haircut 5
    6. 6. The law of diminishing utility is based upon three facts.* Firstly The wants of a man are unlimited but single want can be satisfied.* Secondly Different goods are not perfect substitutes for each other in the satisfaction of various particular wants.* Thirdly There is no change in the tastes of the consumers. 6
    7. 7. * 7
    8. 8. *1 ICE CREAM = ECSTATIC 8
    9. 9. *2nd ICE CREAM = STILL ECSTATIC 9
    10. 10. *3rd ICE CREAM = VERY HAPPY 10
    11. 11. *4th ICE CREAM = HAPPY 11
    12. 12. *5th ICE CREAM = STILL HAPPY 12
    13. 13. *6th ICE CREAM = NOT SO HAPPY 13
    14. 14. *7th ICE CREAM = UNHAPPY 14
    15. 15. *8th ICE CREAM = SICK 15
    16. 16. The following table will make the law ofdiminishing marginal utility more clear Units Total Utility Marginal Utility 1st ice cream 20 20 2nd ice cream 32 12 3rd ice cream 40 8 4th ice cream 44 4 * 5th ice cream The 45 1 following table will make 6th ice cream law of diminishing marginal the 45 0 7TH ice cream utility more clear. 42 -3 8th ice cream 40 16 -5
    17. 17. * It is clear that in a given span of time :-* The first cone of ice cream taken man gives 20 units of utility.* When he takes second cone of ice cream, the marginal utility goes down to 12 units.* When he consumes fifth cone 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), and soon, until he pukes…* Here it may be noted that the utility of the successive units consumed diminishes not because they are of inferior in quality than that of others. We assume that 17 all the units of a commodity consumed are exactly alike
    18. 18. The graph will make the law of diminishingmarginal utility more clear 50 Total utility 40 30 20 Total utility 10 0 1 2 3 4 5 6 7 8 Marginal utility 30 20 10 Marginal utility 0 1 2 3 4 5 6 7 8 -10 18
    19. 19. Assumptions of the Law:-The assumptions are –***** . 19
    20. 20. Exceptions of the Law*Intoxicants.* Money.* Rare collections.Example: collection of the rare stamps and coins 20
    21. 21. (p.s. No smiley has been hurt during the making of this presentation!!) 21

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