Law of diminishing marginal utility

Law of Diminishing Marginal Utility:

Psychologically,intensity of desire for a commodity tends to decrease as more and more units of a commodity are consumed.

        Law of diminishing marginal utility states that as more and more units of a commodity are consumed,marginal utility derived from every additional unit of a good must decline.It is also called fundamental psychological law.

      Marshall  has stated the law of diminishing Marginal utility as follows:

"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 is based on two important facts:

1) The total wants of a man are virtually unlimited.as an individual goes consuming more and more units of a commodity,intensity of his want for the commodity goes on falling that is, When saturation point is reached Marginal utility of good implies that individual has all that he wants of the good in question.

2) the second fact is that the goods are not perfect substitutes for each other in the satisfaction of various particular wants. And when a consumer consumes more and more units of a good,intensity of his particular want for good diminishes.

 ( as can be seen in the figure as more and more units are consumed the marginal utlity continue declines.)





(Blog 7)