Post on 21-Mar-2017
LAW OF DIMINISHING MARGINAL UTILITY
Presented by : Lijin Mathew
B1 MBAMCMAT
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 “ = ”
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 “ ”
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
Table shows law of diminishing marginal utility
Units Total Utility Marginal Utility
1 glass 20 202 glass 32 12
3 glass 404 glass 425 glass 426 glass 39
8
2
0-3
Quantity
Tota
l Util
ity
Total Utility
Mar
gina
l Util
ity Saturation Point
GRAPHS SHOWING THE TOTAL AND DIMINISHING MARGINAL UTILITY of COMMODITY X
𝑇𝑈 𝑥
𝑀𝑈 𝑥
0 321 4 5 6 7 8
128
16
20
4
24
28
Diminishing MU curve
Initial utility
Zero MU
Mar
gina
l Util
ity
X
Y
Graph showing law of Diminishing Marginal Utility
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
Thank
you………………………………
Questions ??????