what is law of dmu and assumptions
Answers
Answered by
9
Heya....
Law of DMU stands for Law of Diminishing Marginal Utility......
It states that.....
When more and more additional unit of a commodity is consumed then the marginal satisfaction tends to decline with every additional consumption and goes to negative or zero too...
Assumptions....
* Standard unit of s commodity is to be consumed not in fractions....
* Consumption should be continuous not in gaps....
Law of DMU stands for Law of Diminishing Marginal Utility......
It states that.....
When more and more additional unit of a commodity is consumed then the marginal satisfaction tends to decline with every additional consumption and goes to negative or zero too...
Assumptions....
* Standard unit of s commodity is to be consumed not in fractions....
* Consumption should be continuous not in gaps....
Answered by
5
The law is said to hold true under certain conditions, and these conditions are referred to as the assumptions of the law of diminishing marginal utility. These are:
It is assumed that the unit of the consumer good is a standard one, i.e. the rational quantity of the commodity is consumed. Such as, a cup of tea, a pair of shoes, bottle of cold drink, glass of water, etc.
It is assumed that the utility is measurable, and the satisfaction of the consumers can be expressed in the quantitative terms.
The consumer’s tastes and preferences remain same during the period of the consumption.
There must be continuity in the consumption. If a break is necessary, then the time interval between the consumption of two units should be appropriately short.
It is assumed that the quality of the commodity remains uniform during the period of consumption.
It is assumed that the unit of the consumer good is a standard one, i.e. the rational quantity of the commodity is consumed. Such as, a cup of tea, a pair of shoes, bottle of cold drink, glass of water, etc.
It is assumed that the utility is measurable, and the satisfaction of the consumers can be expressed in the quantitative terms.
The consumer’s tastes and preferences remain same during the period of the consumption.
There must be continuity in the consumption. If a break is necessary, then the time interval between the consumption of two units should be appropriately short.
It is assumed that the quality of the commodity remains uniform during the period of consumption.
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