Question
Explain the law of diminishing marginal utility with the help of a total utility schedule.
Solution
According to the Law of Diminishing Marginal Utility, marginal utility of a good diminishes as an individual consumes more units of a good. In other words, as a consumer takes more units of a good, the extra utility or satisfaction that he derives from an extra unit of the good goes on falling.
Schedule showing diminishing marginal utility
|
No: of Dose consumed per day. |
Total utility |
Marginal Utility |
|
1 2 3 4 5 6 7 8 |
12 22 30 36 40 41 39 34 |
12 10 8 6 4 1 -2 -5 |
As per the schedule, marginal utility of the second unit is 10. For the consumption of the third unit, the marginal utility falls to 8. Next, for the consumption of the fourth unit, the marginal utility falls to 6 and so on. For the consumption of the 7th unit the marginal utility turns to negative and for the 8th unit negative utility increases. Thus, any extra unit beyond six gives disutility rather than positive satisfaction.
