The Law of Diminishing Marginal Utility is the basic law of consumption. It explains the common experience of the consumers. It is based on one of the characteristics of human wants which states that though human wants are unlimited, each want is satiable. We can satisfy any want at a particular point of time.
Let us assume that a person is hungry. Let us further suppose that he was provided with some apples. As he goes on consuming one apple after another, he gets complete satisfaction after the consumption of some apples, say, five apples. But the utility derived by him from successive units will decline with every increase in the stock of the apples. He hesitates to eat apples after the point of satiety. So the consumption of more and more apples brings less and less utility for the consumer. This is same in the case of all normal consumers. Herman Henrich Gossen, a German economist was the first person who propounded this Law of Diminishing Marginal Utility in 1854. He stated this law as follows:
“The magnitude of one and the same satisfaction, when we continue to enjoy it without interruption continually decreases until satisfaction is reached”.
Jevons described this law as Gossen’s first law of consumption. Later on, Marshall stated and developed this law on scientific basis.
Statement of the Law of Diminishing Marginal Utility: Marshall stated this law in the following way.
“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“.
Boulding stated this law as follows : “As a consumer increases the consumption of any one commodity keeping constant the consumption of other commodities, the marginal utility of the variable commodity must eventually decline”.
Illustration of the Law : The Law of Diminishing Marginal Utility is illustrated with the help of the following table and diagram
| Quantity of Mangoes | Margianal Utility (MU) | Total Utility (TU) |
| 1 | 20 Utils | 20 Utils |
| 2 | 18 Utils | 38 Utils |
| 3 | 15 Utils | 53 Utils |
| 4 | 11 Utils | 64 Utils |
| 5 | 6 Utils | 70 Utils |
| 6 | 0 Utils | 70 Utils |
| 7 | -8 Utils | 62 Utils |
| 8 | -16 Utils | 46 Utils |
In the above table, it is assumed that the consumers is taking mangoes one after another. Marginal Utility is the utility obtained by a consumers from the consumption of additional unit of a commodity. Total utility is the utility obtained from a given quantities of a commodity. It is the total of all the marginal utilities. It is clear from the above Table that the consumer gets less and less utilities as he consumes more and more mangoes. The first mango gives him 20 utils of satisfaction. The second unit gives 18 utils. The marginal utility diminishes when he consumes more and more units. The total utility increases at a diminishing rate. When the consumer takes 5th unit, his total utility and marginal utility are 70 utils and 6 utils respectively. Marginal utility is zero at 6th mango. It means that the consumer attained the level of satisfaction or satiety at this unit. If he takes 7th mango, it gives him negative utility. He hesitates to take 7th and 8th mangoes. Here total utility decreases and marginal utility become negative. This law can also he illustrated by means of the following diagrams
As shown in the above, the top diagram indicates the nature and slope of Total Utility curve. It is an upward sloping curve. At first its rise is considerably high. Later on, it increases at a diminishing rate. Lastly, it slopes downwards denoting a rapid fall in total utility of the consumer. Bottom diagram shows the nature and slope of marginal utility curve. Marginal utility curve slopes downwards from left to right. It intersects the OX at a point when total utility curve is at its highest point. It remains negative when total utility curve slopes downwards. The diminishing marginal utility curve indicates the fall in the marginal utility derived by all individual consumer with every addition in his stock of the commodity.
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