Question

Exceptions to the Law of Diminishing Marginal Utility.

Point out any four exceptions of the law of Diminishing Margimal Utility.

Examine the law of diminishing marginal utility giving its exceptions.

Answer 1

It is believed that the Law of DMU is not applicable in the following cases. But, strictly speaking. The assumption of the law of DMU is not followed in these exceptions.

1. Hobbies: It is believed that in the case of certains, such as stamp collection, antique (historic) collection, etc., MU goes on increasing with the acquisition of additional units. But here the person does not collect the same types of stamps, and therefore, the assumption of homogeneity is not fulfilled.
2. Drunkards/Drug addicts: It is believed that every dose of drugs or liquor increases utility to the consumer. But in the case of a drunkard or drug addict, no rational behaviour is assumed.
3. Miser: A miser’s greed increases with the increases in the stock of money. But here, Miser displays an abnormal behaviour in hoarding wealth. Therefore, the assumption of rational behaviour does not apply.
4. Music and poetry: It is believed that more poetry and music give greater satisfaction.
5. Reading: Reading more books provides more knowledge and, in turn, greater satisfaction. But the reader in search of knowledge does not read the same book every now and then. Therefore, the assumption of homogeneity does not apply.
6. Money: It is assumed that an individual gets more satisfaction with more money, and he wants to have more of it. In the case of money, it is to be noted that money alone does not satisfy a want directly. It only acts as purchasing power to purchase goods and services. Goods purchased with money do have diminishing marginal utility.