1. Explain the law of diminishing marginal utility along with its exceptions.
1. Introduction: The law of diminishing marginal utility was given by Alfred Marshal in his famous book called ‘Principles of Economics’ published in 1890

2. 2. Meaning of M.U. It is the net change in TU because of consuming an additional unit of the product. 3. Statement of the law *: As the consumer consumes more and more units of a particular commodity, the utility derived from successive units goes on diminishing.
Units TU MU 1 10 2 18 8 3 24 6 4 28 5 26 -2

3. 4. Assumptions of the law
All the units of the commodity should be homogenous
Consumption should be continuous
The size of the units should be reasonable
Tastes, preferences, habits and fashion should not change over the period of consumption
Consumer should be rational (sensible)
Utility is cardinally measurable
The good is single purpose
All wants can be completely satisfied

4. 5.Diagrammatic PresentationTU
& TU curve MU
O Units
MU curve

5. 6. Relationship between TU and MU
1. When the TU increases at a diminishing rate, MU diminishes but is positive
2. When the TU is Constant (maximum), MU=0
3. When TU decreases, MU becomes negative

6. 7. Exceptions to the law* 1. Antique and rare articles 2. Liquor
3. Money and Wealth