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 ??????