Law of Diminishing Marginal Utility
The law of diminishing marginal utility describes a familiar and fundamental tendency of humanbehavior. The law of diminishing marginal utility states that:
“As a consumer consumes more and more units of a specific commodity, the utility from the successiveunits goes on diminishing”.
Mr. H. Gossen, a German economist, was first to explain this law in 1854. Alfred Marshal later onrestated this law in the following words:
“The additional benefit which a person derives from an increase of his stock of a thing diminishes withevery increase in the stock that already has”.
LAW IS BASED UPON THREE FACTS: * The law of diminishing marginal utility is based upon three facts. First, total wants of a man are …show more content…
CURVE/DIAGRAM OF LAW OF DIMINISHING MARGINAL UTILITY:The law of diminishing marginal utility can also be represented by a diagram. Handouts by: Sachin Pourush
3. In the figure (2.2), along OX we measure units of a commodity consumed and along OY is shown themarginal utility derived from them. The marginal utility of the first glass of water is called initial utility. It isequal to 20 units. The MU of the 5th glass of water is zero. It is called satiety point. The MU of the 6thglass of water is negative (-3). The MU curve here lies below the OX axis. The utility curve MM/ falls leftfrom left down to the right showing that the marginal utility of the success units of glasses of water