Question

Explain the law of diminishing marginal utility.

State the law of diminishing marginal utility.

Explain the law of diminishing marginal utility, using a diagram.

Describe briefly the law of diminishing marginal utility with the help of schedule and diagramme.

Discuss the law of diminishing marginal utility theory.

Answer 1

1. Statement of the Law: The law of diminishing Marginal utility states that (other things being equal) as the number of units consumed of a commodity increases, the marginal utility of that commodity diminishes. In other words, as the consumption of goods increases, the marginal utility derived from successive units of a given commodity goes on diminishing.
2. Definition: In his words, Marshall’s 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.”
3. The law of diminishing marginal utility can be explained using a schedule and a diagram.
   

   Units of commodity	Total Utility (T.U.)	Marginal Utility (M.U.)
   1	10	10
   2	18	8
   3	24	6
   4	28	4
   5	30	2
   6	30	0
   7	28	−2

4. The schedule shows that as the number of units of the commodity increases, total utility increases. It reaches a maximum with the 5th & 6th units and remains the same, but with the 7th unit, the total utility decreases from 30 to 28.
5. The marginal utility can be derived from total utility. It is observed that the marginal utility is falling continuously. It reaches zero and then becomes negative.
6. The marginal utility is zero when total utility is maximum, and the marginal utility is negative when total utility is falling.
   
7. In the above diagram, the X-axis represents units of commodity, and the Y-axis represents marginal utility. Various points from the table are plotted on the graph. Joining those points gives us a curve known as the marginal utility curve.
8.  The curve slopes downwards from left to right. It touches the X-axis and becomes negative. It is observed from the diagram that at the 6th unit of commodity, the marginal utility becomes zero when the total utility becomes maximum. It is the point of satiety, i.e., the want is completely satisfied, and its intensity is nil. With the 7th unit of the commodity, total utility began to fall, and marginal utility became negative.