It contains the Gossen's first law with diagram ,importance and limitations

1. Law of diminishing marginal
utility
Nasiya v k

2. Introduction
• Gossen’s first law
• Alfred Marshall
• ‘the additional benefit which a person derives
from a given increase in the stock of a thing
diminishes with every increase in the stock that
he already has”

3. • If a consumer reaches a point where consuming
additional units will increase total utility but at a
decreasing rate as marginal utility begins to
decline.

4. Assumptions
• 1.The utility is measurable in cardinal form
• 2.A rational consumer aims at the maximization
of his
• utility.
• 3.Standard unit of measurement is constant.
• 4.The commodity is consumed
continuously.(there is no time limit in between
consumption)
• 5. Proper units of good are consumed by the
consumer.

5. • 6.Units are homogenous in nature
• 7.The taste of the consumer remains same .
• 8.Income of the consumer remains constant.
• 9.Commodity is divisible
• 10.Fashion remains same

6. Example
Number of
units
Marginal
utility
Total utility
1 10 10
2 8 18
3 6 24
4 4 28
5 2 30
6 0 30
7 -2 28

7. Graphical representation

8. Applications of the law
• The law of diminishing marginal utility is the
basis of the law of demand. The demand curves
slopes downward due to this law
• the law of equi- marginal utility and concept of
consumer’s surplus are derived from this law.
• The principle of progressive income taxation can
be justified by the law of diminishing marginal
utility.
• The law of diminishing marginal utility can be
used to justify the redistrubution of income .

9. • The law of diminishing marginal utility helped to
resolve the diamond-water paradox of value.

10. Limitations
• 1. if the consumed units of a commodity are not
homogenous the law will not operate
• 2.if there is a time interval in between
consumption the law will not operate
• 3. the consumer should be rational
• 4.if there is any change in income of the
consumer the law will not operate.
• 5.the price of substitute remain the same etc.

11. •Thank you