Explain law of diminishing marginal utility with the help of utility schedule.
Law of Diminishing Marginal Utility states that as a consumer consumes more and more units of a commodity in succession then, the utility derived from consumption of each additional unit of the commodity falls.
From the schedule, we can observe that the as more and more units of the commodity are consumed, the Marginal Utility derived from the consumption of each additional unit of the commodity tends to fall. With the consumption of the successive units, the Marginal Utility becomes zero and consequently becomes negative. (As per the schedule, MU is zero at the consumption of 4th unit and becomes negative at 5th unit consumed).
|
Units of X |
MU |
|
1 |
18 |
|
2 |
15 |
|
3 |
10 |
|
4 |
0 |
|
5 |
-2 |
From the schedule, we can observe that the as more and more units of the commodity are consumed, the Marginal Utility derived from the consumption of each additional unit of the commodity tends to fall. With the consumption of the successive units, the Marginal Utility becomes zero and consequently becomes negative. (As per the schedule, MU is zero at the consumption of 4th unit and becomes negative at 5th unit consumed).