Professional Documents
Culture Documents
Law of DMU
Law of DMU
From the above table, it is clear that in a given span of time, the first glass of water to a thirsty man gives 20 units of utility. When he takes second glass of water, the marginal utility goes on down to 12 units; When he consumes fifth glass of water, the marginal utility drops down to zero and if the consumption of water is forced further from this point, the utility changes into disutility (-3). Here it may be noted that the utility of then successive units consumed diminishes not because they are not of inferior in quality than that of others. We assume that all the units of a commodity consumed are exactly alike. The utility of the successive units falls simply because they happen to be consumed afterwards.
In the figure (2.2), along OX we measure units of a commodity consumed and along OY is shown the marginal utility derived from them. The marginal utility of the first glass of water is called initial utility. It is equal to 20 units. The MU of the 5th glass of water is zero. It is called satiety point. The MU of the 6th / glass of water is negative (-3). The MU curve here lies below the OX axis. The utility curve MM falls left from left down to the right showing that the marginal utility of the success units of glasses of water is falling.