Limitations of the Law

The Law of Diminishing Marginal Utility, as enunciated above, is based on certain assumptions:

(i) Suitahle Units. It is assumed that the commodity is taken in suitable units. If you begin taking water by spoonfuls when thirsty, or if you want to judge the utility of the morsels rather than the full chapatis, your thirst or hunger will be at first stimulated rather than assuaged, and the utility may. therefore, at first, rise instead of falling. But. sooner or later, a point will be reached when utility will begin to diminish. Unic-,», therefore, the units are of a suitable size. the law will not hold good. The initial quantity s~wOuld be greater than the ‘critical

(ii) Suitahle Tune. It is further assumed that the commodity is taken within a certain time, otherwise the law will not apply. If you take your first meal at JO a.m. and the next at 2 p.m .. there is no reason why the utility of the second meal may be less. But in case you are compelled to take the second meal within an hour of your having taken the first, the law will apply, and the utility of the second meal will be less.

(iii) No Change in Consumers Tastes. Another assumption is that the character of the consumer does not change. The consumer must not, for instance, have developed a craving. The more music one hears, the more literature one reads, the more wine a drunkard takes, the more money a miser has, the greater is the utility in each case. This is so because the character of the consumer has undergone a change. More reading lifts a person to a higher plane, and he is able to appreciate and enjoy literature better than he could before. Similarly, a drunkard is said to enjoy each successive peg more tl,lan the previous one.

(iii) Normal Persons. TIle Law 01′ Diminishing Marginal Utility applies to normal persons and not to eccentric or abnormal persons like misers. In other words, wc assume rational behaviour on thc part of the consumers. In case they behave in a queer and irrational manner, the law will not hold good.

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