Law of diminishing marginal utility

Law of marginal utility

Law diminishing marginal utility states that when consumer consume the particular commodity contineously then the utility of each succesive unit of commodity goes diminishing. In other words when the consumer consume the commodity again and again contineous basis then his utility of each succesive unit of commodity goes decline.

For example If a man is very hungry and if consume a apple then  he gain some util(satisfaction)and if he consume one more apple the util of the next apple goes down and its decline after each successive consumption of apple.

Assumption of law of marginal utility

1.The utility is measured in cardinal number ex 1,2,3....
2.Standard unit of consumption ex one glass of water not a spoon.
3.The utility of a commodity is independent.
4.Continious consumption of a commodity.
5.There is no change in the quality of a commodity.
6.The consumer is a rational consumer.
7.It is assume that utility is measurable in monetary terms.

Relationship between MU(marginal utility) and TU (total utility)

1.When marginal utility increases the total utility is increases at increasing rate.
2.When marginal utility decreases the total utility is increasing at decreasing rate.
3.When marginal utility is negative the total utility start decline.
4.When marginal utility is zero the total utility is maximum.
5.Total utility is the summation of marginal utility and marginal utility is change in total utility.

Law of variable proportion

Law of variable proportion

Law of variable proportion states that when we combined both factor(fixed factor and variable factor) and only one factor is increased more and more and keeping all other factor remains constant,then initially the total product is increasing at increasing rate(marginal product is increasing) in the beginning,then increasing at decreasing rate(marginal product is decreasing)and finally total product is decreasing (marginal product is negative).

Assumption of law of variable proportion.

1.Only variable factor is increasing and all other factor remains constant.
2.This law is applied only in the production field only.
3.State of technology is remains constant because if technology is upgrade the marginal and average product is increasing.
4.It operate in short run production where fixed

and variable factor are exits.
5. It is assumed that all the variable factor are equally efficient.

Schedule

Diagram

Example  Land is the fixed factor and labour is the variable factor.If the producer increases the labour more and more the marginal product is start increasing,then decreasing and finally negative.

Another important law of Economics
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Law of supply

LAW OF SUPPLY

law of supply states that there is positive relationship between price and quantity supply,which means when price increase quantity supply increases and vice-virca. 

ASSUMPTIONS OF LAW OF SUPPLY

No change in price of  cost of production.

No change in price of related goods.

Number of firm in a market remain constant.

Technology remains constant.

Government policies remains constant.

                    

                                        

law of demand and its assumption

Law of demand states that there is inverse realtionship between price and quantity demand,which means when price increases quantity demand decreases and vice versa.

Assumption of law of demand   

1.There is no change in price.

2.Income of the buyer remain constant.

3.Size of consumer remain constant.

4.Taste and prefrence of buyer remain constant.

5.Standard unit of consumption.