Explain the law of diminishing marginal utility with the help of schedule and diagram.
Please give answer in ur own words
Answers
The additional benefit which a person derives from a given increase of his stock of a thing diminishes with every increase in the stock that he already has.”
This law is based upon two important facts. Firstly, while the total wants of a man are virtually unlimited, each single want is satiable. Therefore, as an individual consumes more and more units of goods, intensity of his want for the goods goes on falling and a point is reached where the individual no longer wants any more units of the goods. That is, when saturation point is reached, marginal utility of goods becomes zero. Zero marginal utility of goods implies that the individual has all that he wants of the goods in question.
The second fact on which the law of diminishing marginal utility is based is that the different goods are not perfect substitutes for each other in the satisfaction of various particular wants. When an individual consumes more and more units of a goods, the intensity of particular want for the goods diminishes but if the units of that goods could be devoted to the satisfaction of other wants and yield as much satisfaction as they did initially in the satisfaction of the first want, marginal utility of the good would not have diminished.
It is obvious from the above that the law of diminishing marginal utility describes a familiar and fundamental tendency of human nature. This law has been arrived at by introspection and by observing how people behave.