This law states that as more and more standard units of a good is consumed, marginal utility derived from every additional unit must decline. This law states that after a certain level of consumption, marginal utility goes negative due to unpleasant experience or dissatisfaction.
For instance, on a hot summer day, you are feeling very thirsty. Therefore you go to a juice shop and order a glass of lime juice. The first glass of juice will provide you with maximum satisfaction say, 100 utils that is he is in the state of equilibrium. Consumer equilibrium is a situation where a consumer gets maximum satisfaction out of his given income and existing market prices. Now as you get the second glass of juice,this will probably decrease your utility to maybe 60 utils. The utility from the 3rd glass would be even less. There will be a point where the utility will be 0 and further consumption may lead to dis-utility.
BASIC ASSUMPTIONS
1. Commodity is consumed in some standard units such as a cu of tea or a glass of water and not a soon of tea or a drop of water.
2. There is continuous consumption of the commodity that is after two hours may give less, equal or more utility.
3. Quality of commodity should not change.
4. Consumer must behave in a rational manner.
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