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Assumptions of Law of Diminishing Marginal Utility

Definition: The Law of Diminishing Marginal Utility states that with the increased consumption of the commodity, the satisfaction derived from each successive unit goes on diminishing.

Assumptions of Law of Diminishing Marginal Utility

The law is said to hold true under certain conditions, and these conditions are referred to as the assumptions of the law of diminishing marginal utility. These are:

  1. It is assumed that the unit of the consumer good is a standard one, i.e. the rational quantity of the commodity is consumed. Such as, a cup of tea, a pair of shoes, bottle of cold drink, glass of water, etc.
  2. It is assumed that the utility is measurable, and the satisfaction of the consumers can be expressed in the quantitative terms.
  3. The consumer’s tastes and preferences remain same during the period of the consumption.
  4. There must be continuity in the consumption. If a break is necessary, then the time interval between the consumption of two units should be appropriately short.
  5. It is assumed that the quality of the commodity remains uniform during the period of consumption.
  6. All the commodities consumed by the consumer are said to be independent of each other, such as the marginal utility of one commodity has no relation with the marginal utility of another commodity.
  7. It is assumed that the income of the consumer and the price of goods and services remains unchanged during the period of consumption.
  8. The marginal utility of money remains constant for the consumer.
  9. The mental condition of the consumer should remain normal during the consumption period. For example, if a person drinks any alcoholic drink, then he will derive more pleasure with each additional glass of drink, this is because of a change in his mental status due to intoxication.

The conditions of diminishing marginal utility hold universally. But, however, in certain conditions such as accumulation of money, hobbies of collecting stamps, old coins, songs, etc. the marginal utility might initially increase, but eventually it decreases.

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