Law of Diminishing Marginal Utility:- Description

1. Law
Of
Diminishing
Marginal Utility
1
Submitted by:
Mamta
Amritpal (1428709)
MBA-I
CITMS
Submitted to:
Prof. Ivreet Kaur

2. Law of Diminishing Marginal
Utility
Meaning
Law of DMU states that as a consumer
increases the consumption of any one
commodity, keeping constant the
consumption of all other commodities, the
marginal utility of the variable commodity
must eventually decline.
Definition
-According to Samuelson,
“As the amount consumed of a good increases,
the marginal utility of the good tends to
decrease.” 2

3. Assumptions
1. Utility can be measured in the cardinal
number system(i.e. 0,1,2).
2. There is no change in the income of the
consumer.
3. There is continuous consumption of the
commodity.
4. There is no change in the tastes, character,
fashion and habits of the consumer.
3

4. Marginal Utility:
Marginal utility is the addition made to total
utility by consuming one more unit of
commodity.
Total Utility:
Total utility refers to the entire amount of
satisfaction obtained from consuming
various quantities of a commodity.
4

5. 5
Table
Units Total utility Marginal utility
0 0 0
1 8 8
2 14 6
3 18 4
4 20 2
5 20 0
6 18 -2

6. 6
0
5
10
15
20
25
0 2 4 6 8
(Curve)Total utility
Total Utility
y-axis
x-axis

7. 7
-4
-2
0
2
4
6
8
10
0 2 4 6 8
y-axis
Marginal Utility
x-axis

8. -5
0
5
10
15
20
25
0 2 4 6 8
Total Utility
Marginal utility
y-axis
x-axis
8

9. 9