This document discusses the law of diminishing marginal utility. It defines utility, total utility, and marginal utility. The law of diminishing marginal utility states that as consumption of a good increases incrementally, the satisfaction from each additional unit decreases. This is shown through an example table where the marginal utility decreases as total consumption of glasses of water increases from 1 to 6. Graphs further illustrate how total utility increases at a decreasing rate while marginal utility diminishes with increasing consumption of a commodity.

1. LAW OF DIMINISHING
MARGINAL UTILITY
Presented by :
Lijin Mathew
B1 MBA
MCMAT

2.  Utility :
utility is the psychological feeling of satisfaction,
pleasure, happiness or well-being, which a consumer derives
from the consumption, possession or the use of commodity
 Total Utility :
The sum total of satisfaction which a
consumer receives by consuming
the various unity of the commodity
“ 𝑇𝑈 𝑛= 𝑈1 + 𝑈2 + 𝑈3+. . . 𝑈 𝑛 ”

3.  Marginal Utility
Marginal utility can be defined as a measure of
relative satisfaction gained from an increase
in the consumption of that good or service
“ MU = 𝑇𝑈 𝑛 − 𝑇𝑈 𝑛−1 ”

4. LAW OF DIMINISHING MARGINAL UTILITY
 The law of diminishing marginal utility states that, “as the
quantity consumed of a commodity goes on
increasing, the utility derived from each
successive unit goes on diminishing,
consumption of all other commodities
remaining the same”
 This law is applicable to all consumer goods –durable and
non-durable goods

5. Table shows law of diminishing marginal
utility
Units Total Utility Marginal Utility
1 glass 20 20
2 glass 32 12
3 glass 40
4 glass 42
5 glass 42
6 glass 39
8
2
0
-3

6. Quantity
TotalUtility
Total Utility
MarginalUtility
Saturation Point
GRAPHS SHOWING THE TOTAL AND DIMINISHING MARGINAL UTILITY
of COMMODITY X
𝑇𝑈 𝑥
𝑀𝑈 𝑥

7. 0
321 4 5 6 7 8
12
8
16
20
4
24
28
Diminishing MU
curve
Initial
utility
Zero
MU
MarginalUtility
X
Y
Graph showing law of Diminishing Marginal Utility

8. Limitations of the law
 The unit of consumer good must be standard one
 The consumer’s taste or preference must remain the
same during the period of consumption
 There must be continuity in consumption
 The mental condition of the consumer must remain
normal during the period of consumption