Law of Diminishing Marginal Utility Video Lecture | Economics Class 11 - Commerce

welcome back friends in this segment
we'll be understanding what is the law
of diminishing marginal utility
diminishing marginal utility now before
understanding the law of diminishing
marginal utility we need to understand
this fact that human bonds are unlimited
when human ones are unlimited
we cannot satisfy all the ones that we
have but if we take one single bond at a
time we can satisfy each of these bonds
for example as human I may have a want
to purchase a car I may also have a want
to purchase a house I also have want to
purchase to purchase vegetables I may
also have a want to purchase a scooter I
may also have a one even to purchase a
penny now these bonds are unlimited and
they go on multiplying so it is a matter
of fact that we cannot satisfy all the
wants but if we take one point at a time
that is purchasing a pen content not
purchase a pen yes I can or take an
example of purchasing a house do you
think I cannot perceive the house I if I
take just want as a single one I can
always satisfy this one so when bonds
are unlimited all one's cannot be
satisfied but if we take a single bond
at a time then it is such a bill that is
you can satisfy that one now let's see
what the law of diminishing marginal
utility say the law says the additional
benefit
which a person derives from given
increase in stock of a thing diminishes
with every increase in the stock that he
already has now this says the additional
benefit the benefit here means the
utility or the satisfaction so the
additional benefit which a person
derives from an increase in the stock of
the thing at is if he goes on increasing
the stock or if he goes on increasing
the consumption or if he goes on
increasing the purchases made so what
happens if he goes on increasing the
stock or increasing the consumption the
benefit or the utility or the
satisfaction diminishes with every
increase as you go on increasing the
consumption is satisfaction level that
you derive from the next consumption
next unit of consumption
it goes on diminishing let's say you are
having ice creams the first ice cream
that you have will give you the maximum
amount of satisfaction now when you have
the second ice cream it is obvious that
you will derive lesser satisfaction from
it because when you consume the first
ice cream you did not have any ice
creams before you had a bond you had a
desire to have the ice cream so with the
consumption of first ice cream that
desire that bond is satisfied so you
derive the maximum level of satisfaction
but when you have the second unit that
is the second ice cream you again derive
some level of utility some level of
satisfaction but it is
not equal or more than the first it will
always be less than the satisfaction
derived from the first ice cream because
you've already had D ice cream now you
do not have that intense a bond to have
another ice cream but let's continue you
also have the third ice cream now what
will happen is in the third consumption
the satisfaction that you get will
decrease further mode will diminish
furthermore and as you go on having more
and more ice creams the extra benefit
the additional benefit or the additional
satisfaction or the utility you derive
from each consumption will go on
reducing will go on diminishing let's
understand this thing with the help of
Earth's titude we are already clear with
our concepts on total utility and
marginal utility we know what total
utility is we also know what marginal
utility is total utility is the total
benefit total satisfaction total utility
derived from all the consumptions taken
together and marginal utility is
additional benefit additional utility or
additional satisfaction derived from an
additional consumption so now let us
understand the schedule given here a
person is consuming a commodity now when
he consumes the first unit of the
commodity the total utility that he
derives is 20 because from edie
he derived twenty utility only as the
marginal utility this marginal utility
was 20 so this total utility was also 20
now when he consumes the second unit
what happens his consumption of the
second unit gives him lesser utility
from that particular consumption that is
he derives a lesser amount of
satisfaction in the first consumption he
derived a satisfaction level of 20 in
the second consumption he derives a
satisfaction level of only 15 so what
has happened his satisfaction level in
the second unit has decreased and in the
third unit of consumption his
satisfaction level from the third unit
decreases to ten earlier in the second
unit when he consumed the second unit it
was 15 and when he consumes the third
unit it falls to 10 when he consumes the
fourth unit
the happiness the benefit the utility
the satisfaction that he derives from
the fourth unit of consumption is only
five
now because he is having more and more
of that commodity that commodity is not
giving him that big a level of
satisfaction the satisfaction level with
each consumption is declining his
diminution is reducing and when he has
the fifth unit the satisfaction level
that he derived from the fifth unit is
zero now why would it be zero because
this person is done with consuming that
commodity now that commodity is no more
giving him any happiness it is no more
giving him any utility or satisfaction
so the satisfaction level at fifth
consumption is zero what happens when he
still continues to consume he consumes
the sixth and the seventh unit the
satisfaction level gets into the
negative it's minus 5 and minus 10
respectively
now it's very difficult to understand
how can the satisfaction level be minus
5 or minus 10 or any number in - but
this is our assumption we have to put a
cardinal number to the satisfaction
level derive so once we are done with
consuming we do not want to consume more
units of the commodity and still if we
consume more we have negative
satisfaction let's consider a case where
you are very hungry and you are having
food and the first muscle you have you
feel very happy you derive satisfaction
from it you derive utility from it but
the second muscle that goes in gives you
a lesser amount of satisfaction
the third muscle that goes in will give
you a further lesser amount of
affection and finally when your stomach
is full you will have you will derive no
satisfaction from the consumption and if
you still go on consuming you may feel
restless you may feel that your stomach
is full and it cannot have more of the
commodity so the satisfaction that you
will get so your happiness will get
converted into unhappiness you will
actually not want to have it but in our
assumption you go on continuing your
consumption so the satisfaction or the
happiness you derive from it will get
into the negative now let's take a look
at total utility total utility is
nothing but marginal utility taken
together all the marginal utilities
taken together it is the cumulative
value of all the marginal utilities so
at first unit of consumption since
marginal utility is 20 total utility is
also 20 at second level of consumption
total utility becomes 35 how because you
derive 20 from the first consumption and
15 from the second so total utility at
the second unit of consumption is 35 at
the third unit of consumption 20 from
the first 15 from the second and 10 from
the third so if you add all these take a
sum of all these you will get a
satisfaction level of 45 but this is the
total satisfaction total utility
likewise at the fourth you will have 50
at the fifth you still have 50 because
there the marginal utility is zero and
if you add 0 to 50 what you will get is
what you get is 50
the total utility at the sixth unit of
consumption now falls to 45 because you
derived a satisfaction of 50 til the
fifth unit and in the sixth unit you are
deriving negative utility of five so 15
minus 5 will be fortified same is the
case with seventh unit of consumption at
seventh unit you are deriving a marginal
utility of minus 10 so till the sixth
unit your total utility was 45 and if
you add minus 10 to it your total
utility will fall to 35 again now if you
take a close look at these figures you
will observe that the marginal utility
is constantly falling with every
additional unit of consumption your
satisfaction level is falling so at
every level the marginal utility is
falling however the total utility goes
on increasing till a certain level after
that it starts to fall so when the
marginal utility gets negative your
total utility starts to fall until that
period it goes on increasing from 22
from 20 it increased to 35 from 35 that
increase to 45 from 45 to 50 it is going
on increasing but once the marginal
utility gets negative it starts to fall
from 50 it came to 45 and from 45 it
reaches to 35