Presentataion Of The Law of diminishing marginal utility

Presentataion Of The Law of diminishing marginal utility
Reviewed by Hammad Naziron Apr 01 2013
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Law of Diminishing Marginal Utility:

Explanation of the Law of diminishing marginal utility with the help of Schedule and Diagram.

Introduction of the Law of diminishing marginal utility:
The concept of diminishing marginal utility was introduced in 1871. It is a common experience of every consumer that as utility goes on diminishing. This tendency on the part of marginal utility to diminish with every increase in the stock of a commodity is called the law of diminishing marginal utility.

Statement of the Law of diminishing marginal utility:
Marshall has stated this law as,

"The additional benefit which a person derives from an increase of his stock of a commodity diminishes with every increase in the stock that he already has".

Explanation of the Law of diminishing marginal utility
We explain the law of diminishing marginal utility by a very simple example. Suppose a man is very thirsty. He starts drinking glasses of water. The first glass of water gives him greater utility. When he takes 2nd glass of water, the utility will be less than the 1st glass. It is because the edge of his thirst has been blunted. If he drinks 3rd glass of water, the utility of the 3rd glass will be less than that of 2nd and so on..
The utility goes on diminishing with the consumption of every successive glass of water till it drops down to zero. If the consumer is forced to take a glass of water, the utility will become negative.

Explanation of the Law of diminishing marginal utility with the help of Schedule.

Table:

Units	Total Utility	Marginal Utility
1st Glass	06	6
2nd Glass	10	4
3rd Glass	12	2
4th Glass	12	0
5th Glass	10	-2
6th Glass	06	-4

From the table it is clear that in a given period of time, the first glass of water to a thirsty man gives 6 units of utility. When he takes 2nd glass of water, the marginal utility goes down to 4 units. When he consumed 4th glass of water the marginal utility drops down to zero and it the consumption if water is forced further from this point, the utility change into dis utility.

Explanation of the Law of diminishing marginal utility with the help of Diagram:

Diagram:

In this diagram we measure MU along with OY and units of commodity along with ox. The utility of 1st glass of water is 6 units, the utility of 2nd glass of water is 4 and so on. The fourth glass yields zero utility and 5th and 6th glass yields negative utility. MU is the marginal utility curve which has a left to right downward trend and shows that as consumer consumes the successive units of a commodity, MU diminishes with the addition of every unit.