ECON 1001 Lecture 9: Micro Economics Notes7
Document Summary
Law of diminishing marginal utility states that as the consumer consumes more and more units of the good, the addition to total utility obtained goes on decreasing. This law explains the fundamental and clear human nature therefore called fundamental law of satisfaction or fundamental psychological law. Prof alfred marshall states the law as follows. The additional benefit which a person derives from a given increase of stock of a thing diminishes with every increase in the stock he already has. Explanation: as the consumer consumes commodity x he gets the satisfaction in decreasing order at first unit his satisfaction is 8 but with every successive unit it falls. At 5th unit marginal utility becomes zero which shows minimum satisfaction and which is consumer"s equilibrium. Consumers equilibrium refer to the situation in which a consumer gets maximum satisfaction from the use of given level of income.
