A law of Diminishing Marginal Utility in best and simplest way.

1. SUBMITTEDTO– Dr. AMITA
MAXWELL
SUBMITTED BY-
BHANU PRATAP SINGH

2. LAW OF
DIMINISHING
MARGINAL
UTILITY

3. WHAT IS MARGINAL UTILITY ?
•Marginal utility is the change in
the total utility resulting from
one unit change in the
consumption of a commodity
per unit of time.

4. WHAT IS LAW OF DIMINISHING
MARGINAL UTILITY ?
• This law was firstly introduced by German economist Mr. H.
GOSSEN in 1854.
• Alfred Marshall later on restated this law – “ The additional
benefit which a person derives from a given increase of
stock of a thing diminishes with every increase in stock
which he already has cetrus peribus.”
• This law simply tell us that we obtain less and less utility
from a successive unit of a commodity as we consume more
and more numbers of it.
• MUn = TUn – TU(n-1)

5. EXAMPLEOFLAWOFDIMINISHINGMARGINALUTILITY
• If we take an example of apple then, when a person consume first
apple he will be ecstatic.
• When he consumes second apple he will be still feel ecstatic.
• In third happy, he will feel very happy.
• In fourth apple, he will be happy.
• In fifth apple, he will feel still happy.
• In sixth apple, he will be not so happy.
• In seventh apple, he will be not so happy.
• And in eighth apple, he will feel sick.
• And if he continues with next apple then he will not feel better even
then he will be not able to consume ninth apple.

6. EXAMPLEOFLAWOFDIMINISHINGMARGINALUTILITY
UNITS OF APPLE TOTAL UTILITY
OF APPLE
MARGINAL UTILITY
OF APPLE
1 30 30
2 50 20
3 65 15
4 75 10
5 80 5
6 82 2
7 82 0
8 80 -2

7. -10
0
10
20
30
40
1 2 3 4 5 6 7 8
GRAPHICAL REPRESENTATION OF LAW OF
DIMINISHING MARGINAL UTILITY
UNITS OF COMMODITY
MUn

8. ASSUMPTIONS TO THE LAW OF DIMINISHING
MARGINAL UTILITY
•Uniform quality and size of commodity.
•Consumption within the same time.
•No change in the mental condition of the
consumer during consumption.
•No change in taste & fashion of commodity.
•No change in the price of substitute commodity
or commodity.
•Applicable to pleasure economy.

9. EXCEPTIONS TO THE LAW OF
DIMINISHING MARGINAL UTILITY
•Rare and curious things.
•Goods of display.
•Intoxicants.