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What is Law of Marginal Diminishing Utility?

by Team Goseeko

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, the utility from the successive units goes on diminishing”.

Mr. H. Gossen, a German economist, was first to explain this law in 1854. Alfred Marshal later on restated this law in the following words:

“The additional benefit which a person derives from an increase of his stock of a thing diminishes with every increase in the stock that already has”.

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

  1. Total wants of a man are unlimited but each single want can be satisfied. As a man gets more and more units of a commodity, the desire of his for that good goes on falling. A point is reached when the consumer no longer wants any more units of that good.
  2. Different goods are not perfect substitutes for each other in the satisfaction of various particular wants. As such the marginal utility will decline as the consumer gets additional units of a specific good.
  3. The marginal utility of money is constant given the consumer’s wealth.

Assumption of law of diminishing utility are:

  1. Rational behavior of consumer
  2. Constant marginal utility of money
  3. Diminishing marginal utility
  4. Utility is additive
  5. Consumption to be continuous
  6. Suitable quantity of a commodity
  7. Characteristics of the consumer does not change
  8. No change of fashion, customer, tastes
  9. No change in the price of commodity

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