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Presentation on

    Law of




    Presented by
   Rahul Majumder
         1
Law of Diminishing
     Marginal Utility
Law Of Diminishing Marginal Utility
Law
Table With The Graph
Assumptions & Exceptions Of Law
Thank You




                         2
Definition

* The  law of diminishing marginal utility
 describes a familiar and fundamental tendency
 of human behavior.


* “The law of diminishing marginal utility states
 that, “as a consumer consumes more and more
 units of a specific commodity, utility from the
 successive units goes on diminishing”.




                         3
a law of diminishing marginal utility

  MARGINAL




  UTILITY
  The consumption of various unit of commodity.

  TOTAL UTILITY(TU)
  The sum total of satisfaction which a consumer receives by
consuming the various unity of the commodity.

(The more unit of a commodity he consumes, the greater will be his
total utility)
                                     4
The concept of marginal utility grew out of attempts by
      economists to explain the determination of price.


•Marginal utility can be defined as a measure of relative satisfaction
gained or lost from an increase or decrease in the consumption of
that good or service.


•Examples –A motor vehicle or A haircut




                                    5
The law of diminishing utility is based upon three facts.


* Firstly
   The wants of a man are unlimited but single want can be satisfied.


* Secondly
   Different goods are not perfect substitutes for each other in the
 satisfaction of various particular wants.


* Thirdly
    There is no change in the tastes of the consumers.

                                      6
*


    7
*




1 ICE CREAM = ECSTATIC
                         8
*




2nd ICE CREAM = STILL ECSTATIC
                         9
*




3rd ICE CREAM = VERY HAPPY
                        10
*




4th ICE CREAM = HAPPY
                        11
*




5th ICE CREAM = STILL HAPPY
                        12
*




6th ICE CREAM = NOT SO HAPPY
                       13
*




7th ICE CREAM = UNHAPPY
                          14
*




8th ICE CREAM = SICK
                       15
The following table will make the law of
diminishing marginal utility more clear
      Units         Total Utility   Marginal Utility
  1st ice cream          20                20
  2nd ice cream          32                12
  3rd ice cream          40                8
  4th ice cream          44                4

           *
  5th ice cream
              The       45              1
                  following table will make
  6th ice cream law of diminishing marginal
            the         45              0
  7TH ice cream          utility more clear.
                        42             -3
   8th ice cream         40
                         16                -5
* It is clear that in a given span of time :-
* The first cone of ice cream taken
    man gives 20 units of utility.
* When he takes second cone of ice cream,
    the marginal utility goes down to 12 units.
* When he consumes fifth cone of water,
     the marginal utility drops down to zero and if
     the consumption of water is forced further
    from this point, the utility changes into disutility (–3), and so
on, until he pukes…
* Here it may be noted that the utility of the successive
    units consumed diminishes not because they are of
    inferior in quality than that of others. We assume that
                                   17
    all the units of a commodity consumed are exactly alike
The graph will make the law of diminishing
marginal utility more clear
       50            Total utility
       40
       30
       20
                                                  Total utility
       10
        0
             1   2   3     4   5   6    7    8
                         Marginal utility
       30

       20

       10
                                            Marginal utility
        0
             1   2   3     4   5   6    7    8
       -10                         18
Assumptions of the Law:-
The assumptions are –


*
*
*
*
*                            .



                        19
Exceptions of the Law
*Intoxicants.

* Money.


* Rare collections.
Example: collection of the rare stamps and coins




                                20
(p.s. No smiley has been hurt during the making of this
                     presentation!!)




                               21

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Presentation on diminishing marginal utility by rahul majumder,bba 2011-14,ilead

  • 1. Presentation on Law of Presented by Rahul Majumder 1
  • 2. Law of Diminishing Marginal Utility Law Of Diminishing Marginal Utility Law Table With The Graph Assumptions & Exceptions Of Law Thank You 2
  • 3. Definition * The law of diminishing marginal utility describes a familiar and fundamental tendency of human behavior. * “The law of diminishing marginal utility states that, “as a consumer consumes more and more units of a specific commodity, utility from the successive units goes on diminishing”. 3
  • 4. a law of diminishing marginal utility MARGINAL UTILITY The consumption of various unit of commodity. TOTAL UTILITY(TU) The sum total of satisfaction which a consumer receives by consuming the various unity of the commodity. (The more unit of a commodity he consumes, the greater will be his total utility) 4
  • 5. The concept of marginal utility grew out of attempts by economists to explain the determination of price. •Marginal utility can be defined as a measure of relative satisfaction gained or lost from an increase or decrease in the consumption of that good or service. •Examples –A motor vehicle or A haircut 5
  • 6. The law of diminishing utility is based upon three facts. * Firstly The wants of a man are unlimited but single want can be satisfied. * Secondly Different goods are not perfect substitutes for each other in the satisfaction of various particular wants. * Thirdly There is no change in the tastes of the consumers. 6
  • 7. * 7
  • 8. * 1 ICE CREAM = ECSTATIC 8
  • 9. * 2nd ICE CREAM = STILL ECSTATIC 9
  • 10. * 3rd ICE CREAM = VERY HAPPY 10
  • 11. * 4th ICE CREAM = HAPPY 11
  • 12. * 5th ICE CREAM = STILL HAPPY 12
  • 13. * 6th ICE CREAM = NOT SO HAPPY 13
  • 14. * 7th ICE CREAM = UNHAPPY 14
  • 15. * 8th ICE CREAM = SICK 15
  • 16. The following table will make the law of diminishing marginal utility more clear Units Total Utility Marginal Utility 1st ice cream 20 20 2nd ice cream 32 12 3rd ice cream 40 8 4th ice cream 44 4 * 5th ice cream The 45 1 following table will make 6th ice cream law of diminishing marginal the 45 0 7TH ice cream utility more clear. 42 -3 8th ice cream 40 16 -5
  • 17. * It is clear that in a given span of time :- * The first cone of ice cream taken man gives 20 units of utility. * When he takes second cone of ice cream, the marginal utility goes down to 12 units. * When he consumes fifth cone of water, the marginal utility drops down to zero and if the consumption of water is forced further from this point, the utility changes into disutility (–3), and so on, until he pukes… * Here it may be noted that the utility of the successive units consumed diminishes not because they are of inferior in quality than that of others. We assume that 17 all the units of a commodity consumed are exactly alike
  • 18. The graph will make the law of diminishing marginal utility more clear 50 Total utility 40 30 20 Total utility 10 0 1 2 3 4 5 6 7 8 Marginal utility 30 20 10 Marginal utility 0 1 2 3 4 5 6 7 8 -10 18
  • 19. Assumptions of the Law:- The assumptions are – * * * * * . 19
  • 20. Exceptions of the Law *Intoxicants. * Money. * Rare collections. Example: collection of the rare stamps and coins 20
  • 21. (p.s. No smiley has been hurt during the making of this presentation!!) 21

Hinweis der Redaktion

  1. Simply put, - the law of diminishing marginal utility means that the first u