The document discusses three economic concepts: 1) The law of diminishing marginal utility, which states that the additional benefit a person derives from consuming more of a good diminishes with each additional unit consumed. 2) The law of equi-marginal utility, which assumes consumers rationally allocate spending to equalize marginal utility across goods given prices and income. 3) Elasticity of supply, which measures how responsive the quantity supplied is to changes in price.

1. Law of Diminishing Marginal Utility
Equi-Marginal Utility
Elasticity of Supply

2. Law of Diminishing Marginal Utility
DEFINITION:
Marshall states the law as, “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”.

3. Assumptions
1.Utility can be measured by cardinal numbers such as 1, 2, 3 and so on.
 2.The marginal utility of money of the consumer remains constant.
3.The consumer should be a rational consumer and his aim is to attain maximum
satisfaction with minimum expenditure.
 4. The units of the commodity consumed must be reasonable in size.
5. The commodity consumed should be homogeneous or uniform in character like
weight, quality, taste, colour etc.
6.The consumption of goods must take place continuously at a given period of
time.
7. There should be no change in the taste, habits, preferences, fashions, income
and character of the consumer during the process of consumption.

7. Criticisms
 Utility cannot be measured numerically, because utility is
subjective.
 This law is based on the unrealistic assumptions.
 This law is not applicable to indivisible commodities.

8. The Law of Equi-Marginal Utility
Assumptions
1. The consumer is rational in the sense that he wants to get maximum satisfaction.
2. The utility of each commodity is measurable in cardinal numbers.
3. The marginal utility of money remains constant.
4. The income of the consumer is given.
5. There is perfect competition in the market
6. The prices of the commodities are given.
7. The law of diminishing marginal utility operates.

13. • Criticisms
• 1. In practice, utility cannot be measured, only be felt.
• 2. This Law cannot be applied to durable goods.

14. Elasticity of Supply
The elasticity of supply is a measure of how responsive the quantity supplied is to a change in price:

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