question_answer

Explain the law of diminishing marginal utility with the help of a total utility schedule.

Answer:

Law of Diminishing Marginal Utility states that as a consumer consumes more and more units of a commodity at succession, then the Marginal Utility derived from the consumption of each additional unit of the commodity falls.
Units of Commodity	Total Utility (TU)	Marginal Utility (MU) \[MU=T{{U}_{n}}-T{{U}_{n-1}}\]
1	80	(80 - 0) = 80
2	160	(160 - 80) = 80
3	220	(220 - 160) = 60
4	270	(270 - 220) = 50
5	310	(310 - 270) = 40
6	340	(340 - 310) = 30
From the above schedule, it can be observed that for two units of consumption, marginal utility is 80. For the third unit, the marginal utility falls to 60. For the fourth unit, the marginal utility further falls to 50 and so on. Thus, as more and more units of a commodity are consumed, the marginal utility derived from the consumption of each additional unit falls.