Question

Explain the law of diminishing marginal utility with the help of a utility schedule.

What is Law of Diminishing Marginal Utility? Give a numerical example.

Answer 1

The law of diminishing marginal utility states that as more units of a commodity are consumed successively, the marginal utility from each additional unit tends to fall, other things remaining unchanged.

Ice creams consumed	Total utility (utils)	Marginal utility (utils)
1	20	20
2	36	16
3	46	10
4	50	4
5	50	0
6	44	−6

The schedule shows MU declining from 20 to 16, 10 and 4. At the fifth unit MU is zero and TU is maximum; the sixth unit gives negative MU and lowers TU.