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Question
Explain the law of diminishing marginal utility.
Solution
Statement of the Law:-
The law of diminishing Marginal utility states that (other thing being equal) s the number of units consumed of commodity increases, the marginal utility of that commodity diminishes. In other words, as the consumption of good increases, the marginal utility derived from successive units of a given commodities goes on diminishing.
Definition:-
In he words of Marshal the Law states that, “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”
The law of diminishing Marginal Utility can be explained with the help of a schedule and a diagram.
| Units of Consumption | Total Utility (T.U.) | Marginal Utility () |
| 1 | 10 | 10 |
| 2 | 18 | 8 |
| 3 | 24 | 6 |
| 4 | 28 | 4 |
| 5 | 30 | 2 |
| 6 | 30 | 0 |
| 7 | 28 | -2 |
The schedule shows that with every increase in the units of Consumption, the total utility is increasing. It reaches Maximum with the 5th & 6th unit and remains the same, but with 7th unit the total utility decreases from 30-28.
The Marginal Utility can be derived from total utility. It is observed the Marginal Utility is falling continuously. It reaches zero and then become negative.
The Marginal Utility is Zero when total utility is Maximum and Marginal utility is negative when total utility is falling.
In the above diagram
X- Axis represents units of consumption and Y-Axis represents Marginal Utility. Various points from the table are plotted on graph. Join those points we can get a curve known as Marginal utility curve. The curve slopes down wards from left to right. It touches X- axis and becomes negative. It is observed from the diagram that at 6th unit of consumption the marginal utility becomes zero, when the total utility becomes maximum. It is the point of Satiety i.e. the want is completely satisfied and its intensity is nil. With the 7th unit of consumption the total utility started falling and the Marginal Utility becomes negative.
RELATED QUESTIONS
The law of diminishing marginal utility can be explained with the help of schedule and diagram.
Explain the law of diminishing marginal utility with the help of a total utility schedule.
Explain the meaning of diminishing marginal rate of substitution with the help of an example.
Explain with reasons, whether you agree or disagree with the following statement
The law of 'diminishing marginal utility' is important in practice.
Explain the importance of the law of Diminishing Marginal Utility.
What is the behaviour of Total Variable Cost, as output increases?
Define or explain the following concept :
Marginal utility.
Assumption to the Law of diminishing Marginal util.
Exceptions to the Law of diminishing Marginal Util.
Answer with reason, whether you agree or disagree with the following statement.
The law of diminishing marginal utility depends upon assumptions.
Give reasons or explain the following statement:
In a rich country marginal propensity to consume is less.
State the following statement is True or False:
The law of diminishing marginal utility explains economic behaviour of a rational consumer.
State the following statement is True or False:
Negative MU denotes more satisfaction.
Answer in detail :
State and explain the law of Diminishing Marginal Utility. Explain its assumptions.
State with reason whether you agree or disagree:
Law of Diminishing Marginal utility is important in practice.
State with reason whether you agree or disagree:
There are no real exceptions to the law of Diminishing Marginal Utility.
State with reason whether you 'agree' or 'disagree' with the following statement.
Homogeneity of commodities is the only assumption of the law of diminishing marginal utility.
Answer the following question.
What is meant by "diminishing returns to a factor"? Discuss any two reasons for the operation of diminishing returns to a factor.
Answer the following question:
Explain the law of diminishing marginal utility using a hypothetical schedule.
Name the law which deals with the behaviour of marginal utility when the consumer consumes a commodity continuously at a given time. Explain this law with the help of a diagram.
