# 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.

# Law of Equi-Marginal Utility : Definition and Explanation

## INTRODUCTION OF LAW OF EQUI-MARGINAL UTILITY

We know that 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 face 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 of 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 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.

# Total Utility – Mutual Relationship with Marginal Utility

### Definition

At a given time the overall utility derived from the consumption of all units of a commodity is called Total Utility.

# Marginal Utility : Definition and Classification

## Definition of Marginal Utility

Marginal Utility is the utility which is derived from the consumption of an additional unit of a commodity. In other words, it is the addition to total utility, resulting from adding one unit to the consumption of a commodity.

Example : Ram consumes 6 ice creams at a time. In this case, 6 ice creams will be the marginal unit and utility derived by him from adding one unit to the consumption of a commodity.

# Utility – Concept and Characteristics of Utility

## Meaning of Utility

Utility means the power that satisfies any want. It is such an internal quality; which is found in all commodities desired by a person. The quality (power or capability) of commodity which satisfies the human want; directly or indirectly is called Utility. Those commodities, which have wants satisfying power are called ‘Useful Commodities‘.

# Macro Economics – Importance, Limitations and Difficulties

### Meaning of Macro Economics

The word macro means big. Thus, in Macro Economics, either the whole economy is studied or those big units which are related to the economy as a whole.

## Definition

In the words of Prof. Boulding

Macro Economics deals not with individual quantities as such but aggregates of these quantities, not with individual incomes but national income, not with individual output but with national output.

Thus, macro economics studies the various groups related to the whole economy, like, national savings, national income, national consumption, total employment, total production, etc..