Assumptions of the law of diminishing marginal utility

1] Utility of a commodity lies in the capacity of a commodity to satisfy a human wants

2] The consumer begins consumption of a particular commodity ie real consumption. (actual consumption ) eg water.

3] The commodity has only one use.

4] Utility of goods is independent – i.e utility of a commodity experienced by the consumer depends on the quantity only. It bears no influence of any other commodity.

5] Measurability condition – The consumer has the ability to express the utility he derieves from consumption in cardinal numbers. Therefore utility can be quantified and measured in cardinal numbers.

6] Util – Util is the imaginary or hypothetical unit of measuring utility which is expressed in cardinal numbers.

7]  Utility is additive – Tough each commodity has independent utility, utility of all goods consumed can b added together and thereby sum of total utilities can be obtained.

8]  Condition of constancy – No change in money,  income, tastes, habits preferences, fashion, character etc and no change in consumers mental condition or attitude during the course of consumption.

9]  Condition of homogeneity  ( uniformity )– The units of consumption are perfectiy  identical i.e in in colour, size,shape, flavor, quality etc.

10] Condition of continuity – Units of the consumption must be purchased at the same time and  must be consumed in  quick succession.(i.e no time interval between units of consumption or consumption without any lapse of time )

11] Condition of divisibility – A commodity has to be divisible so that it can be acquired  in small quantities for consumption in quick consumption. Bulky and indivisible goods are consumed only in one purchase. Eg car, t v, etc.

12] Condition of reasonability – The units of consumption must be suitable  ( reasonable or standard size units ) in size or the law of diminishing marginal utility canot be applied. Eg if a thirsty person drinks a soppnful of water marginal utility will rise thereforeit should be consumed in a glass. Similarly medicine should be consumed with a spoon not a glass.

13] Marginal utility of consumers money income is constant – in other words when a consume spends  a part of his income on some good, his remaining money income has the same utility as his total income.

14] Marginal utility of money and quantity of money remains constant throughout consumption.

15] The price of a commodity and the prices of other commodities ( complements and substitutes ) remains constant.

16] Condition of rationality – A consumer should be rational i.e should try to get maximum satisfaction in his limited income.

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