The Law of Diminishing Marginal Utility is based on fact that human wants are unlimited. All wants cannot be satiated at a single point of time. Marshall and other economists developed the Law of Diminishing Marginal Utility on the basis of some assumptions. These assumptions are :
- No time gap
- Homogeneous Units
- Constant income
- Standard Units
- Normal persons
- Constancy in price
- Changes in other people’s stock
- Divisible goods
- Other possessions
- Ordinary goods
- Tastes and preferences
- Marginal utility of Money
The Law of Diminishing Marginal Utility says that unlimited cannot be satiated at a single point of time. So it has a few exceptions or limitations. Even though this law is considered a universal one, it has the following exceptions.
Exceptions Of The Law Of Diminishing Marginal Utility
1. Collection of rare goods: This law is not applicable in the case of rare goods. Persons who collect rare goods like ancient pictures, postage stamps, coins, antiquities etc., get more utilities when they collect more rare goods.
2. Abnormal persons: This law is not applicable in the case of abnormal and eccentric persons like drunkards, gamblers, and misers. These persons develop a fascination and became slaves to their habits. A drunkard feels that he gets more utilities with the consumption of more liquor. Similarly, the utilities of a miser increases with a rise in his collection of money. Music lovers also get more utilities when they heard music for longer hours.
3. Not applicable to money: It is argued that his law is not applicable to money. Normally people get more utility and happiness when they acquire more money. As possession of money is a symbol of prestige and dignity, people incline to earn more money. So their utility increases with every increase in money.