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Hello students, below is a topic of NCERT Economics Class 12 of Microeconomics Class 12 based on the pattern of CBSE Class 12 Economics. This article on Economics Class 12 is related to the s that an economy may face. Use the following information to frame your answers and score extraordinary marks in your examinations.
Law of diminishing marginal utility (DMU) states that as we consume more and more units of a commodity, the utility derived from each successive unit goes on decreasing.
In making choices, most people spread their incomes over different kinds of goods. People prefer a variety of goods because consuming more and more of any one good reduces the marginal satisfaction derived from further consumption of the same good. This law expresses an important relationship between the utility and the quantity consumed of a commodity. Let us understand this law with the help of an example.
Suppose your Father has just come from the market and you offer him a glass of soft drink. The first glass of soft drink will give him great satisfaction. The satisfaction with the second glass will be relatively lesser. With further consumption, a stage will come, when he would not need any more glass of juice, i.e. when the marginal utility drops to zero. After that point, if he is forced to consume even one more glass, it will lead to disutility. Such a decrease in satisfaction with consumption of successive units occurs due to ‘ Law of diminishing marginal utility.’
Law of DMU has universal applicability and applies to all goods and services. This law was first given by a German economist H.H.Gossen. That is why, it is also known as ‘Gossen’s first law of consumption’.
The law of DMU operates under certain specific conditions. Economists call them the assumptions of this law. These are as follows:
It must be noted that ‘utility approach to consumer’s equilibrium’ is based on all these assumptions.
Learn Important Notes for Free Online Class 12 Economics Consumers Equilibrium
Class 12 Economics Online Classes are available at Takshila Learning. Takshila Learning regularly provides you different blogs and articles as requested by students. In this article, Economics Notes On Law of Diminishing Marginal Utility has been discussed. It is a very important topic of CBSE Class 12 Economics.
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