Law of Diminishing Marginal Utility

Law of Diminishing Marginal Utility:

The law of diminishing marginal utility elucidates an ordinary experience of a consumer. When a consumer takes more and more units of a commodity, then the additional utility he derives from an extra unit of the commodity goes on diminishing. Therefore, according to this law, the marginal utility reduces with the raise in the consumption of a commodity. Whenever marginal utility reduces, the total utility rises at a diminishing rate.

Bentham, Gossen, Jevons, Karl Menger contributed primarily for the development of such ideas. However Alfred Marshall perfected such ideas and made it as a law. This Law is also termed as Gossen’s I Law.


According to Marshall, “The additional advantage that a person derives from a given raise of his stock of a thing reduces with every raise in the stock which he already has”.

Assumptions of the Law:

1. The units of consumption should be in standard unit’s example, a cup of tea, a bottle of cool drink and so on.
2. Each units of the commodity should be similar in all aspects such as quality, taste, color and size.
3. The law holds well only whenever the procedure of consumption continues without some time gap.
4. The consumer’s taste, habit or preference should stay similar during the procedure of consumption.
5. The income of the consumer stays constant.
6. The costs of the commodity consumed and its replacements are constant.
7. The consumer is supposed to be a rational economic man. Since a rational consumer, he wants to maximize the net utility.
8. Utility is measurable.


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