Law of Diminishing Marginal Utility

Introduction

The Law of Diminishing Marginal Utility explains a very common human experience. The more of a commodity we consume or possess, the less we want to have it. If the process of consumption or possession of the good goes on, a time will come when we refuse to have it any more. This happens because though human wants are unlimited, there is a limit to each separate want. This familiar and fundamental tendency of human nature is the basis of the law of diminishing marginal utility.

Statement of the Law

Professor Boulding states, “As a consumer increases the consumption of any one commodity, keeping constant the consumption of all other commodities, the marginal utility of the variable commodity must eventually decline.”

According to Marshall, “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.”

From the above definitions, it is clear that as a consumer goes on consuming a commodity one after another, the successive does give him less and less satisfaction.