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Copy of LAW OF UTILITY ANALYSIS
Transcript of Copy of LAW OF UTILITY ANALYSIS
MU = ∆TU/∆Q
LAW OF DIMINISHING MARGINAL UTILITY
The law relates the fact that as we go on consuming a commodity the satisfation derived from its successive unit goes down
“The additional benefits which a person derives
from a given increase of his stock of anything
diminishes with the growth of the stock that he has”.
CARDINAL MEASUREMENT UTILITY
Marshall exposition of the law of diminishing marginal is based on the cardinal measurements of utility. It is assumed that utility can be numerically expressed by the consumer i.e he is capable of mentioning the quantum of utility derived from each additional unit consumed or acquired by him.
CONSTANCY OF MARGINAL UTILITY OF MONEY
Throughout the operation of law , it s assumed that not only the money income of the consumer is given but its marginal utility remains constant so that the consumers preference remains unchange.
It is commonly experienced that a repeat
hearing gives a better satisfaction than
the first one.
It gives more knowledge . A scholar would get more and more satisfaction with every additional book . Knowledge and satisfaction increase by reading different books and not the same one over and over again.
This law is the basis for the law of demand.
This law explains the difference between value in use and value in exchange .
LAW OF EQUI MARGINAL UTILITY
According to this law when a consumer distributes his money income among various good in such a way that the marginal utility derived from the last rupee spent on each good is the same.
According to Marshall ," If a person have a thing which can be put to several uses , he will distibute it among these uses in such a way that it has the same marginal utility in all.
Utility is cardinally measurable
Every consumer is rationally in purchase of goods.
Effect of fashion and custom.
Ignorance or carelessness.
Ex : It is not easy to divide a car or house .Further,
it is not possible for a man to purchase one and 1/2
cars . In actual price it is very different for the consumer to compar MU of different commodities
TABLE and GRAPH
DONE BY :
In economics, utility is a representation of preferences over some set of goods and services. Preferences have a (continuous) utility representation so long as they are transitive, complete, and continuous.
It can also defined as an economic term referring to the total satisfaction received from consuming a good or service.
Approches Of Utility
CARDINAL UTILITY .
ORDINAL UTILITY .
LAW OF UTILITY ANALYSIS
There are two laws relating to marginal utility with the help of which Marshall derived the law of demand .
Law Of Diminishing Marginal Utility .
Law Of Equi Marginal Utility .