Statement of the Law: -The law of diminishing Marginal utility states that
(other thing being equal) s the number of units consumed of commodity
increases, the marginal utility of that commodity diminishes. In other words,
as the consumption of good increases, the marginal utility derived from
successive units of a given commodities goes on diminishing.
Definition: -In he words of Marshal the Law states that, “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 can be explained with the help of a schedule and a
diagram.
|
Units of consumption
|
Total Utility (T.U)
|
Marginal Utility(M.U)
|
|
1
2
3
4
5
6
7
|
10
18
24
28
30
30
28
|
10
8
6
4
2
0
-2
|
The schedule shows that with every increase in the
units of Consumption, the total utility is increasing. It reaches Maximum with
the 5th& 6th unit and remains the same, but with 7th
unit the total utility decreases from 30-28.
The Marginal Utility can be derived from total
utility. It is observed the Marginal Utility is falling continuously. It
reaches zero and then become negative.
In
the above diagram
X-
Axisrepresents units of
consumption and Y-Axisrepresents
Marginal Utility. Various points from the table are plotted on graph. Join those
points we can get a curve known as Marginal utility curve. The curve slopes
down wards from left to right. It touches X- axisand becomes negative. It is observed from the
diagram that at 6th
unit of
