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Economics: Law of Diminishing Marginal Utility

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Economics
Topics
2008 (81)
November (81)
What is Economics?

Law of Diminishing Marginal Utility

Utility refers to the amount of satisfaction a person gets from
consumption of a certain item.and marginal utility refers to the addition
made to total utility, we get after consuming one more unit.

Demand
Market Demand
Law of Demand
Supply
Law of Supply
Change in Demand and
Increase/Decrease in quantit...

An individual's wants are unlimited in number yet each individual's want is

satiable. Because of this, the more we have a commodity, the less we
want to have more of it.
This law state that as the amount consumed of a commodity increases,
the utility derived by the consumer from the additional units, i.e marginal
utility goes on decreasing.

Change in supply and

Increase/decrease in quant...
Equilibrium Price
Changes in Market Equilibrium

The law of diminishing marginal utility explains the downward sloping

demand curve

What is a Market?
Consumer Surplus
Consumer surplus and price
elasticity of demand
Types of goods

Definition
According to Marshall, The additional benefit a person derives from a
given increase of his stock of a thing diminishes with every increase in
the stock that he already has

Economics : Art Or Science

Difference : Micro and Macro
Economics
Central Problems of an Economy
The Production Possibility Curve
Opportunity Cost
What is Elasticity?

Assumptions:
All the units of a commodity must be same in all respects
The unit of the good must be standard
There should be no change in taste during the process of consumption
There must be continuity in consumption
There should be no change in the price of the substitute goods

Price elasticity
Factors affecting Elasticity
Income Elasticity
Cross Elasticity

Explanation:
As more and more quantity of a commodity is consumed, the intensity if
desire decreases and also the utility derived from the additional unit.

Elasticity & Revenue

Consumer Behavior
Utility
Law of Diminishing Marginal Utility
Law of Equi-Marginal Utility
Indifference curve Analysis

Suppose a person eats Bread. and 1st unit of bread gives him maximum
satisfaction. When he will ead 2nd bread his total satisfaction would
increase. But the utility added by 2nd bread(MU) is less then the 1st
bread. His Total utility and marginal utility can be put in the form of a
following schedule.

The indifference curve

The shape of the indifference curve
and the margi...
An indifference map
economicsmicro.blogspot.in/2008/11/law-of -diminishing-marginal-utility .html

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Economics: Law of Diminishing Marginal Utility

A Budget Line (budget constraints)

A change in consumer income and
the budget line
A change in the price of a good and
the budget lin...
Equilibrium position : Indifference
analysis
Income and substitution effect
Theory of Production
Law of diminishing marginal product
Returns to scale
Cost function

Plotting the above data on a graph gives

Total Cost, Fixed Cost and Variable

Cost curves
Marginal Cost and Average Cost
curves
Long Run Cost
Opportunity Costs, Explicit Costs
and Implicit cos...
Derivation of long-run average cost
curve
Economies & Diseconomies of scale
Shifts in the Cost Curves
Isoquant Analysis
Slope of isoquant curve/Marginal
rate of substitut...
Isoquant map
The Isocost Line
Isoquant analysis :The Economically
Efficient Poin...
Producers surplus
What is a Market?
Perfect competition
Demand Curve & Equilibrium in
perfect competition...
Short run profit Maximisation in
perfect competiti...
Long run profit Maximisation
Short run vs Long Run
Monopoly

Here, from the MU curve we can see that MU is declinig as

consumer consumes more of the commodity.
When TU is maximum, MU is Zero.
After that, TU starts declining and MU becomes negative.

Monopolists Demand and MR Curve

Monopoly vs Perfect Competition
Equilibrium/Profit-Maximization :
Monopoly
Sources of Monopoly Power
Price Discrimination :monopoly
Oligopoly
The importance of price and nonprice competition

Exceptions:
Money
Hobbies and Rare Things
Liquor and Music
Things of Display

Kinked demand Curve

Game Theory :Introduction

Importance:

economicsmicro.blogspot.in/2008/11/law-of -diminishing-marginal-utility .html

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Economics: Law of Diminishing Marginal Utility

Game theory
Cooperative versus
noncooperative game

Basis of Law of Demand

Basis of Consumption Expenditure
The basis of Progressive Taxation

Dominant strategy : Game Theory

How to read a payoff matrix : Game
Theory

Posted by Sar ika Gugnani at 12:31 PM

Reactions:

Helpful (100)

Not helpful (9)

Example: Each player has a

dominant strategy
Example: one player dominant
strategy
Nash equilibrium

19 comments:
Anonymous said...

Maximin strategy
Discuss Problems.
Micro Economics

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Very gud work here n very helpful. Thank you. :)

January 19, 2013 at 3:01 AM

Anonymous said...
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March 1, 2013 at 5:41 AM

Anonymous said...

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Sarika Gugnani
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super clarity of writing

April 27, 2013 at 2:38 AM

Anonymous said...
thank u for ur help
October 20, 2013 at 7:37 AM

Anonymous said...
Thank you.it was very helpful
December 23, 2013 at 7:30 AM

Anonymous said...
Good work done
May 12, 2014 at 4:46 PM

Kamya Vishwanath said...

THIS IS SO HELPFUL. Thanks a ton. :D
Made my life so much easier.
May 31, 2014 at 8:48 AM

Anonymous said...
Thanks for the clear explanation.
But I disagree with the examples. Everything object under
economicsmicro.blogspot.in/2008/11/law-of -diminishing-marginal-utility .html

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Economics: Law of Diminishing Marginal Utility

demand is subject to this. Even money in a limiting case is

subject to this!
June 8, 2014 at 11:07 AM

Anonymous said...
great work keep it up man :) .
July 5, 2014 at 3:13 AM

Risha said...
great work keep it up man :) .
July 5, 2014 at 3:14 AM

jashan mundi said...

It's awesome. I love the clarity of answer. This is what I
wanted......(:(:
July 6, 2014 at 12:24 AM

Anonymous said...
No doubt I agree wid u
July 7, 2014 at 8:46 AM

Student said...
very useful,THANKS
July 24, 2014 at 11:47 AM

Anonymous said...
Very much useful
August 16, 2014 at 8:33 PM

Anonymous said...
Good explaination. It's very helpful.
Thankyou
September 8, 2014 at 7:10 AM

Anonymous said...
Why is money an exception?
September 19, 2014 at 8:54 AM

shankar kodumunja said...

very nice
economicsmicro.blogspot.in/2008/11/law-of -diminishing-marginal-utility .html

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Economics: Law of Diminishing Marginal Utility

October 13, 2014 at 1:59 AM

Anonymous said...
its the best of itself i have seen thank u a lot
November 24, 2014 at 12:05 AM

Anonymous said...
Thank you for the INfo. it will be vey helpful
November 26, 2014 at 3:03 AM
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