Question

Answer the following question:
Explain the law of diminishing marginal utility using a hypothetical schedule.

Answer 1

Law of Diminishing Marginal Utility states that as a consumer consumes more and more units of a commodity at succession, then Marginal Utility derived from the consumption of each additional unit of the commodity falls. This can be understood with the help of the following schedule:

The Law of Diminishing Marginal Utility is based on the following two basic assumptions.

1. Standard Units and Reasonable Size of Units- A consumer consumes only standard units of the commodity. For example, a whole of an apple and not half of it. Similarly, a glass of water and a spoon of water.
2. Successive Consumption- Consumption of the successive units of the commodity takes place continuously (i.e. without any time lag). This is because if the consumption takes place with a time lag say of an hour or a week (i.e. consumption of one unit of the commodity takes place today and the consumption of the second unit takes place after one week) then, in the next week the consumer will start a fresh valuation of the utility without taking into consideration the utility derived from the consumption of the previous unit of the commodity in the previous week.
3. In the given schedule when a consumer starts consuming more units of commodity X, then the utility starts diminishing. When a consumer is consuming one unit of good X, the utility derived by it is equal to 50. With the rise in consumption, it diminishes to 30 and finally becomes zero and negative. 

Number of Units Consumed of Commodity X	Total Utility  (TU) (utils)	Marginal Utility (MU) MUn= TUn– TUn – 1 (utils)
1	50	50 - 0 = 50
2	100	100 - 50 = 50
3	130	130 - 100 = 30
4	150	150 - 130 = 20
5	160	160 - 150 = 10
6	160	160 - 160 = 0
7	150	150 - 160 = -10

From the schedule, we can clearly see that with additional units of the good being consumed, the marginal utility of the consumer tends to decline.