2. German economist H.H Gossen developed this law.
This theory also known as Gossen’s First Law.
It was popularized by Prof.Alfred Marshall.
This law has been stated differently by different
economists.
According to Marshall “the additional benefit which a
person derives from a given increase of his stock of a
thing diminishes with every increase in the stock that he
already has”.
Law of Diminishing Marginal Utility say that we obtain
less and less marginal utility from the successive units of
a commodity as we consume more and more of it.
H.H Gossen
Alfred Marshall
Law of Diminishing Marginal Utility
3. PROCESSOR
CLOUD COMPUTING
SERVER
Taste and preference of the consumer
remain unchanged
Income of the consumer remain constant
Units of the goods are identical or similar
The process of consumption is continuous
Assumptions
4. EXPLANATION OF THE LAW
1st
apple
Derives highest level
of utility
Intensity of his desire
declines
2nd
apple
Get lesser
satisfaction than first
apple
Intensity of his desire
again declines
3rd
apple
Get lesser
satisfaction than
second apple
Intensity of his desire
again declines
If he continues to consume more and more apples, utility from each apple
goes on diminishing, as the intensity of his desire goes on diminishing
5. LDMU can be explained with the help of imaginary
utility schedule
Units of apple
consumed
Total utility Marginal utility
1 8 8
2 13 5
3 16 3
4 18 2
5 18 0
6 15 -3
6. In the diagram Units of consumption measured
on the X axis and utility measured on the Y
axis.
In the diagram total utility curve move upward
to maximum T.U point and then slopes
downwards.
Marginal utility curves slopes downward from
the beginning, touched the X axis at zero M.U
point and thereafter goes below X axis when
marginal utility becomes negative.
The falling marginal utility curve from left
down to the right clearly tells us that the
marginal utility of the successive apple or any
other item is falling.
7. The law of diminishing marginal utility is
not applicable to money.
It is not applicable to rare collections like
old stamps, old coins etc.
It is not applicable to the consumption of
liquor.
Limitations of the law
