What Is Consumer Surplus – Explanation | Formula | Diagram

concept of consumer surplus in diagram

The concept of Consumer Surplus was at first introduced by Dupitt. Later on Alfred Marshall stated and developed this concept in a systematic manner. The concept of Consumer Surplus denotes the surplus satisfaction derived by a consumer from the purchase of a commodity. It explains that a consumer always gets surplus satisfaction by paying a less price for a commodity than what he is willing to pay for it. This surplus satisfaction is called ‘Consumer’s Surplus’. Marshall explained that a consumer does not actually pay the maximum amount of money …

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The Law of Diminishing Marginal Utility – A Complete Guide

law of Diminishing Marginal Utility curve

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 suppose that an individual is hungry. Let us further suppose that he was provided with apples. As he goes on consuming one apple after another, he gets complete satisfaction after the consumption of some …

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8 Practical Importance Of Law Of Equi Marginal Utility

6 Vehement Criticism Of Marginal Utility Analysis | importance of law of equi marginal utility

The Law of Equi Marginal Utility is also called as the Law Of Indifference because the consumer, when he reaches the point of maximum satisfaction, becomes indifferent about any other combination of the commodities bought. The importance of Law of Equi Marginal Utility is great in Economics. Practical significance or importance of law of equi marginal utility is described below: Practical Importance Of Law Of Equi Marginal Utility 1. Producer’s equilibrium : A wise producer combines different factors of production and substitutes one for the other to secure maximum profits. …

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Assumptions And Limitations Of Law Of Equi Marginal Utility

Assumptions And Limitations Of Law Of Equi Marginal Utility

In the below, Diagram (A) and Diagram (B) denote the marginal utility and total utilities derived from coffee and bananas respectively.  The amount spent on the two commodities are shown along OX axis and the total utility from the two commodities are shown along OY axis.  The consumer derives 6 utils of marginal utility by spending 1 Dollar on coffee and 6 utils of Marginal utility by spending  2 dollars on bananas. So the marginal Utilities remain equal in both the cases with this expenditure. The law of equi marginal …

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6 Vehement Criticism Of Marginal Utility Analysis

6 Vehement Criticism Of Marginal Utility Analysis | importance of law of equi marginal utility

Marginal utility influences and regulates the price determination of goods and services. There are differences of opinion among the economists regarding whether marginal utility analysis explains the law of demand or not. Vehement criticism was leveled against the utility analysis by the critics. Their criticism is explained as follows: Criticism Of Marginal Utility Analysis 1. Utility-not measurable: The utility analysis assumes that utility is measurable and marginal utility and price are quantitatively related to each toiler. But utility is a psychological idea. We can’t measure it like other commodity. Hence …

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Significance Of Law Of Diminishing Marginal Utility

The Law of diminishing Marginal utility is the most important  law of Economics. Enunciated first by German economist namely Hermann Heinrich Gossen. This law was developed and stated on a systematic manlier by Alfred Marshall. Alfred Marshall stated this law as follows: the additional benefit that  a person derives from a given increase of his stock of a thing diminishes with every increase in the stock that he already has. The Law of diminishing Marginal utility is considered a suitable one for explaining some economic problems and tor formulating  certain economic …

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Law of Equi Marginal Utility With Explanation And Example

The Law of Equi-Marginal Utility was first explained by Hermann Heinrich Gossen. Later on Alfred Marshall refined and developed it. This law is also known as the Proportionality Rule, the Law of Substitution, the Law of indifference, the Law of Equi-marginal Returns and Gossen’s Second Law or Consumption. The Law of Equi-Marginal Utility is described as the Proportionality Rule because the consumer substitutes one commodity for the other until the marginal utility of each commodity is in proportion to its price. Since the consumer goes on substituting the more useful …

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Marginal Utility, Price And Paradox Of Value In Economics

 Marginal Utility: Marginal utility is the additional utility derived by an individual from the consumption of one or more unit of a commodity. Marginal utility denotes the change in the total utility due to the change in quantity consumed of commodity. Marginal utility influences and regulates the price determination of a commodity. This may be explained by the following table. How Does Marginal Utility Determine Price: Number of Mangoes Margial Utility (in utils) Total Utility of Money In Dollars 1 20 $1 2 15 $0-75 cents 3 12 $0-50 cents …

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Relationship Between Total Utility And Marginal Utility

Total utility and marginal utility

Utility means want satisfying power 0f a commodity. Individuals derive utility when they consume a particular commodity or service. Utility is 0f two types namely : Total Utility and Marginal Utility. Total Utility And Marginal Utility: Total utility is the utility derived by a consumer from the consumption of a commodity. It is the sum total of utils (term used for measuring utility) derived from the consumption of total units of a commodity. Total utility remains at first low and increases with every increase in the consumption of units of …

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Practical Importance Of Law Of Diminishing Marginal Utility

The Law of Diminishing Marginal Utility is the one of the most important laws in economics. Law of Demand, Law of  Equi-marginal Utility, Law of Consumer’s surplus and several concepts like Equilibrium in perfect competition, Determination of price etc. are developed on the basis of this law. Its practical importance is much worthy in consumers’ behavior. The practical importance of this law in Economics is explained as follows: Practical Importance  Of Law Of Diminishing Marginal Utility 1. Taxation : This law is the basis of progressive taxation. As a person’s …

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