Explain the law of diminishing marginal utility along

Explain the law of diminishing marginal utility along with its exceptions. 1. Introduction: The law of diminishing marginal utility was given by Alfred Marshal in his famous book called ‘Principles of Economics’ published in 1890 1

2. Meaning of M. U. It is the net change in TU because of consuming an additional unit of the product. Units TU MU 1 10 10 2 18 8 3 24 6 4 28 4 5 28 0 6 26 -2 3. Statement of the law *: As the consumer consumes more and more units of a particular commodity, the utility derived from successive units goes on diminishing.

4. Assumptions of the law 1. All the units of the commodity should be homogenous 2. Consumption should be continuous 3. The size of the units should be reasonable 4. Tastes, preferences, habits and fashion should not change over the period of consumption 5. Consumer should be rational (sensible) 6. Utility is cardinally measurable 7. The good is single purpose 8. All wants can be completely satisfied

5. Diagrammatic Presentation TU & MU O TU curve Units MU curve

6. Relationship between TU and MU 1. When the TU increases at a diminishing rate, MU diminishes but is positive 2. When the TU is Constant (maximum), MU=0 3. When TU decreases, MU becomes negative

7. Exceptions to the law* 1. Antique and rare articles 2. Liquor 3. Money and Wealth