Law of Equi-Marginal Utility : Criticism and Limitation

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.

  1. Generally Consumers are not Calculative by Nature

    Consumers do not spend their income on the basis of calculations, rather they spend their income, according to their habits.

  2. Indivisibility of Goods

    Several commodities, such as – Scooters, .T.V., Machines etc. cannot be divided into small units. Therefore, the comparison of the utility of these units is not possible and also these cannot be compared with marginal unit of other commodities.

  3. Consumers are not Rational

    Generally, man is influenced with customs, traditions,habits and fashion. So, he spends his income unintentionally on the commodities that give less utility. Hence, he is not always rational.

  4. Correct Measurement of Utility is not Possible

    Correct measurement of utility is not possible because utility is a mental satisfaction.

  5. Utility of Money is not Stable

    Like commodities, the utility of money also keep on decreasing. Moreover, the prices of commodities keep on changing (increases and decreases) whereas, money assumed stable in this law.

  6. Lack of Knowledge of Utility

    Generally, consumer does not have any knowledge, about the utility of commodities.

  7. Durability of Goods

    We keep on receiving utility in the long run, from durable goods. So, in short term the comparison of marginal utility of these goods, is impossible.

  8. Maximum Utility does not mean Maximum Satisfaction

    According to critics, actal utility can be maximised but total satisfaction cannot be maximised, by this law. But in practical life, Utility and Satisfaction both are two separates things and these have no direct relation.

  9. Unavailability of Few Goods

    Sometimes, Goods of higher utility are not available in the market and the consumer has to consume the goods of lesser utility, at the place of the goods of higher utility.

  10. Supplementary Goods

    Some goods are supplementary to each other and these are used simultaneously in certain proportion. Such as, Car and Petrol. This law is not applicable, in respect of these goods.

CONCLUSION

In spite of above practical difficulties in the implementation of Law of Equi-marginal Utility, this law cannot be considered mere imagination or unreal. In fact, 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. According to Professor Chapman

We are not compelled to distribute our income, according to the Law of Equi-marginal utility as a stone thrown in air is compelled in a sense to fall back on the earth; but as a matey of fact, we do so in a certain rough fashion, became we are reasonable.

The importance of this law are also discussed later.

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