January 2018

Law of Equi-Marginal Utility : Criticism and Limitation

CRITICISMS, LIMITATIONS OR EXCEPTIONS OF LAW OF EQUI-MARGINAL UTILITY

Following are the main reasons for the criticism of the Law of Equi-marginal utility by H. H. Gossen. Although, it is a basic law of economics and consumers knowingly or unknowingly are compelled, to follow this law. This law is applicable in every field of economic analysis.
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Definition of Law of Equi-Marginal Utility

  • by sadiq

How is the Law of “Equi-marginal utility” helpful in maximizing the utility of a consumer?

INTRODUCTION OF LAW OF EQUI-MARGINAL UTILITY

We know that the wants of every man are unlimited. Wants arise again and again but man has limited means (income) to fulfill his wants and means have alternative uses. Thus, man always faces the problem of distribution of limited means of alternative uses, on his wants; so that, he may get maximum satisfaction (or utility). Law of Equi-Marginal Utility presents the solution to this problem. This law states that if a person, wishes to get maximum satisfaction from his income, he should spend his income on different items, in such a way that the utility of the last unit of money spent on each commodity, should be equal or almost equal. This law of consumption was propounded by a French Economist, H. H. Gossen in 1854 and it is also known as the Second Law of Gossen.
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