The law of diminishing marginal utility along with its Assumption and exception of the law:- StudySpot02

The law of diminishing marginal utility 

The law of diminishing marginal utility was 1st proposed by Mr. Gossen, i.e. this law is also known as gossen's first law. However, it was futher explained by professor Alfred Marshall in  his book ' principles of economics ' 1890.
The law explains that  marginal utility goes on diminishing with an increase in the successive unit of a commodity consumed.

 Marginal utility schedule :- 


Table no.1 marginal utility 

Diagram 1:- marginal utility curve 
Explanation of the diagram:- In the above diagram, 'x' Axis measures MU. Various points of MU are plotted on the graph as per the given schedule. We get MU curve by joining these points.
MU curve slopes downward from left to right . It shows that MU goes on diminishing with every successive increase in the consumption of a commodity. 
In this case , when a consumer consumes the 5th unit,  MU becomes zero . So MU curve touches 'x' Axis. It indicates full satisfaction level. It is called the point of satisfaction. Beyond the point of satiety,  futher consumption of a commodity brings disutility.  It is shown by negative marginal utility.  Thus, it explains that, MU diminishes with every increase in consumption of commodity. 

Assumption of the law 

The validity of the law depends upon the following Assumption:- 
1. Single use :- Utility is multi- purpose for some goods which satisfy variety of wants. Hence, it is assumed that a commodity is used  to satisfy only a single want to experience the law .
2. Homogeneity:- The law assumes that units of a commodity consumed by a consumer are uniform. They are identical or same jn case of size, color, taste,quality etc.
3.Rationality:- A consumer is assumed to be rational person and his behavior is normal a therefore,  he tries to maximize his satisfaction. 
4. Reasonability:- the units of commodity consumed,  should be of a standard or normal size  they should neither be too big nor too small. Example :- a cup of tea,  a glass of water etc.
5. Cardinal measurement :- Utility can be measured in numbers. So that , it is possible to know and compare utility derived from each unit of a commodity. It helps to understand the law.
6.Constancy :- Income, taste, habits, liking etc.of a consumer and price of commodity remain constant throughout the period of consumption.  It also assumes that MU of each unit of money remains constant. 
7. Condition of divisibility :- The law assume that the commodity consumed by the consumer is divisible so that it can be acquired in same quantities for quick consumption. The law holds true only, if the above given assumptions are fulfilled. 

 Exception of the law 

1. Hobbies:- In certain hobbies like collection of stamps , rare coins , paintings etc. The law is not applicable because every additional increase in stock gives more pleasure,  which increases MU.  But it violates homogeneity conditions. 
2. Money :- It is observed that MU of money never becomes 0. It increases when the stock of money increases.  It is because money is a medium of exchange is used to purpose various goods and services to satisfy various wants. Hence ,the law is not applicable in case of money. 
3. Music :- It is experienced that , a repeated of hearing of music,  gives more and more satisfaction.  It increase MU of music . So the law is not applicable.  However,  it does not fulfil the assumption like homogeneity and continuity.
4. Misery:- In case of miser, every additional rupee gives him more and more satisfaction,  because he is a irrational person. So his MU tends to increase with an increase in the stock oc money.  However,  it ignores rationality assumption. 
5.Drunkard :- In case of drunkards,  the level of intoxication increase with every additional quantity of liquor consumed. So MU received by drunkards may increase.  This condition is similar to all addicts. But here, rationality condition is violated.
6. Reading :- Since ,more reading gives deeper knowledge,  a scholar may receive more and more satisfaction,  when he reads various books again and again,  and therefore marginal utility tends to increase.  But, here homogeneity and continuity conditions are not satisfied. 
All these cases are said to be exceptions of the law. But they are not real exceptions as they violate some of the assumptions.  So the law of diminishing marginal utility ( DMU) has universal applicability. 

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