Define Law of Diminishing Marginal Utility

Law of diminishing marginal utility is a fundamental law of economics. Many economics theories are based on it. It is our common experience that when a person has a strong desire for a good, its use gives him a lot of satisfaction. 

In Economics we say that the good has great utility for him. But as the quantity consumed of the good is increased, it becomes less attractive. Every new unit of it consumption gives him less utility. The law of diminishing marginal utility states that “Other things remaining the same as a consumer consumes more and more units of a commodity, the utility from the successive units goes on diminishing” According to Alfred Marshall” The additional benefit which a person derives from an increase of his stock of a thing diminishes with every increase in the stock that he already has”.

The Law of Diminishing Marginal Utility is true only with some assumptions i.e.

Nature of the commodity should not change. If all units of commodity are not of the same quality. The law will not apply. It must be homogeneous.

Suitable Unit of consumption. If the units of consumption are not of normal size the law may not be true. If a thirsty person starts drinking water by spoon, the marginal utility instead of decreasing it will increase.

Continues consumption.  This law will be only true when the consumption is continuous. A person drinks one glass in morning another at noon its utility will not decrease.

Taste and attitude of the consumer remain the same. It must not change. A person has eaten one mango. He wants to eat no more. Meanwhile, a doctor tells him that mangoes are useful for his health.  This will increase the value of mangoes for him.

Income etc

Practical importance

Guides the consumer to maximize his satisfaction.

Form the basis of the law of demand.

Form the basis of theory and practices of taxation.

Diamond, water paradox.

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