Law of Equi-Marginal Utility : Importance and Benefits


Law of Equi-Marginal Utility has an important place in economics. Even though it is highly criticized, its importance cannot be ignored. This applies in the every field of economics, which is clear from the following

  1. In the Field of Consumption

    This law is very important in the field of consumption because every consumer wants to get maximum satisfaction from his limited income. Along with those goods which consumers are consuming presently; they also keep goods for future consumption, so that they can get equal utility at both the times.

  2. In the Fieid of Production

    Usually, producer has capital in a limited quantity but he wants to get maximum profit from his investment (Capital) and it is possible only when the production cost would be less and production would be more. So, the producer uses the cheap and more production giving means (factors of production), at the place of expensive means, until marginal productivity of both the means become equal. In this way, law of Equi-marginal Utility is also applicable in the field of production.

  3. In the Fieldof Exchange

    The main basis of exchange, is this law, because in exchange, goods are purchased and told through money and in every exchange, we compare the utility receiving with utility, giving in return. We keep trying to exchange up to that extent, unless the utility giving become equal, to the utility received. Thus, law equi-marginal Utility is the basis of exchange.

  4. In the Field of Distribution

    In the field of distribution, this law is helpful in distributing the remuneration in factors of production. National income is distributed in Land, Labour, Capital and Organisation. Share of factors of production is determined according to their marginal productivity. Hence, the producer uses that particular factor more; the marginal productivity of which is more, than its remuneration.

  5. In the Field of Public Finance

    In the field of public finance also, this law has very importance. The Principle of Maxirrtum Social Advantage is also based on the Law of qui marginal Utility Government charges more tax from rich and charges less tax from poor people and spend that income in such a ipisray that the poor can get more benefit in comparison to rich persons.


It is clear from the above analysis that Law of equi-marginal Utility is an important basic law of Economics and it is used at wide level. According to Marshall

This law is applicable in almost every field of economic research.

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