Law of Equi-Marginal Utility : Criticism and Limitation


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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Law of Equi-Marginal Utility : Definition and Explanation

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


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.
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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.

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Utility – Concept and Characteristics of Utility

Meaning of Utility

UtilityUtility 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‘.
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