Economics

Causes Of Downward Slope Of Diminishing Marginal Utility Curve

The Law of Diminishing Marginal Utility is the basic law of consumption which 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 one want at a particular point of time. Diminishing Marginal utility curve slopes downwards based on the satisfaction of the consumers.

Causes Of Downward Slope Of Diminishing Marginal Utility Curve :

Diminishing Marginal utility curve slopes downwards from left to right due to two causes which are explained below.

1 . Each want is satiable: It is assumed that individuals can’t satisfy all their wants. But they can satisfy a particular want completely. The additional utility from the successive units of the commodity decreases and remains zero at the level of satiety. Hence marginal utility curve slopes downwards.

2. Imperfect substitutes: If a commodity has perfect substitutes, its marginal utility may not diminish. Similarly, if a commodity is used for satisfying different kinds of wants„ its marginal utility remains the same and will not diminish. But in practice goods which have close and perfect substitutes are less rather rare in number. As a result a particular good is used for satisfying particular want only. Therefore utility derived from additional units diminish and marginal utility curve slopes downwards from left to right.

Law of Diminishing Marginal UtilityAt first Marginal Utility Curve rise considerably high. Later on, it increases at a diminishing rate. Lastly, it slopes downwards denoting a rapid fall in total utility of the consumer. 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 becomes negative when the 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 of the commodity.

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