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Law of Equimarginal Utility
Law of Equimarginal Utility
that the last rupee spent on each commodity yields him equal marginal
utility
Definition
• Dr. Marshall, “If a persons has a thing which he can put to several uses, he
will distribute it among these uses in such a way, that he has the same
marginal utility in all.
Two Statement of Law
• 1. Traditional statement
• 2. Modern statement
1. Traditional Statement of the law
For Example: 1*20=20 and 3*10=30 then Total Income spent = Rs.
50
• 3*20=60 and 4*10=40 then Total Income spent = Rs. 100
2 Modern Statement
MUa / Pa = Mub/ Pb =
Muc/Pc
Modern Method Calculating MU with Price
Consumer’s Choices
Law of Equi-Marginal Utility
Loss and Gain b/w X and
Y
Importance of the law
• Consumption
• Production
• Exchange
• Price discrimination
• Distribution
• Public finance and International trade
• Distribution of assets and Distribution of time
• Saving and investment
Criticism of Law of Equi-marginal Utility