Law of diminishing marginal utility

The law of diminishing marginal utility has been put forward by  Dr Alfred Marshall in his book “ Principles of economics ” published in 1890.

According to him , utility is “the want satisfying capacity of a commodity” that diminishes with increase in consumption. This tendency of utility to diminish is a universal  experience which Marshall has generalized in his statement of the law. According to him “ the total utility of a thing to anyone, rises  with every rise  in his stock of a thing but not as fast as his stock rises. In other words the additional benefit that a person derives from a given rise of his stock of a thing, diminishes with every rise in the stock he already has.”


When a person  consumes a commodity satisfaction derived per unit of consumption is his marginal utility and satisfaction derived from all units of consumption is his total utility. This can be explained with the help of a utility schedule ie “ a list of utilities derived from successive units of consumption “.eg  when a thirsty person consumes a glass of water the intensity of his thirst is maximum before the first sip. Therefore  the marginal utility derived from the first sip will also be maximum ie. 3 utils. Since his total consumption at this stage is also  one sip his total utility will  also be 3 utils.

After consumption of one sip of water his want is partially satisfied and therefore the intensity of his want has reduced thus the second sip of water will give him satisfaction but less than he first ie 2 utils. At this stage his total consumption of water is 2 sips therefore his total utility will be 3 utils + 2 utils = 5 utils. As seen here his consumption has doubled but total utility has not doubled, it has increased at a diminishing rate. Ie if one sip of water yields 3 utils of satisfaction two sips should yield 6 utils but as seen here it is 5 utils. ( since his want is partially satisfied and the intensity has reduced )


This will continue till the fourth sip of water where the marginal utility is zero indicating hat the consumer is fully satisfied and any additional unit of the commodity does not give the consumer any extra satisfaction. Here  his total utility is maximum and constant ie 6 utils.

If the commodity is freely available ( without paying any price for it ) the consumer in order to get maximum satisfaction will consume till his marginal utility is zero and total utility is maximum and constant. This is called the point of satiety. A rational consumer will stop consumption at this point.

If the consumer consumes beyond point of satiety ie  he consumes the fifth sip of water he will experience a negative utility or disutility say -1 util and his total utility will start decreasing eg from 6 utils to 5utils.

The utility curve or the utility diagram is “ the diagrammatic representation of the utilities derived from successive  units of consumption “

The diagram shows that as consumption rises

marginal utility diminishes and total utility rises at a diminishing rate..

Marginal utility becomes zero and total utility remains maximum and constant.

Marginal utility becomes negative ( disutility ) and total utility starts decreasing.

Therefore as Dr Alfred Marshall states “ The more of a thing a person has the less he wants to have the more of it “.

Posted in General Economics