Assumptions of Law of Diminishing Marginal Utility

The assumptions of law of diminishing marginal utility are as follows:

• Rational Consumer

 The consumer is a rational human being whose mental condition and taste remains constant. If during the time of consumption consumer’s mental condition or taste undergoes a change, the law will not operate.

• Homogeneous Goods

 The units of the commodity consumed must be homogeneous, i.e. uniform in size and quality.

• Continuous Consumption

The consumption process must be continuous. In other words, units are taken one after another successively without any interval of time. Indeed the first cup of tea in the morning and the second cup in the evening will not result in diminishing marginal utility.

• Cardinal Measurement of Utility

The law is based on the cardinal measurement of utility which assumes that utility which assumes that utility derived from a particular good can be numerically expressed by the consumer.