Explain the derivation of demand curve in the case of single commodity??
Answers
Answer:
In the case of a single commodity, the derivation of the demand curve is done with the help of the concept of diminishing marginal utility. Marginal utility is the satisfaction a person receives from consuming one unit of commodity. ... As more units of commodity X are purchased, its marginal utility diminishes.
Explanation:
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(1) Derivation of Demand Curve in the Case of a Single Commodity (Law of Diminishing Marginal Utility):
Dr. Alfred Marshall derived the demand curve with the aid of law of diminishing marginal utility. The law of diminishing marginal utility states that as the consumer purchases more and more units of a commodity, he gets less and less utility from the successive units of the expenditure. At the same time, as the consumer purchases more and more units of one commodity, then lesser and lesser amount of money is left with him to buy other goods and services.
A rational consumer, before, while purchasing a commodity compares the price of the commodity which he has to pay with the utility of a commodity he receives from it. So long as the marginal utility of a commodity is higher than its price (MUx > Px), the consumer would demand more and more units of it till its marginal utility is equal to its price MUx = Px or the equilibrium condition is established.
To put it differently, as the consumer consumes more and more units of a commodity, its marginal utility goes on diminishing. So it is only at a diminishing price at which the consumer would like to demand more and more units of a commodity.
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