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1 eae ne, t apply to money. The marginal utility of Vaal ‘, & The law fails when thereis a large number of consumers foo ng, oA (When 4 Consumer consumes a commodity for the first time, then N€, , Marginal utility for some time) For example, aman seeing the televisic, In his-life, ~, , , , - | ;, ay et INCFeasing, , n for the first time, -— p, , =), , Practical Importance of the Law, , ; ion. This is a basic, _ The Law of Diminishing Marginal Utility is a basic law of consumptio at. The following, Principle of consumer behaviour. Its importance in our practical life is very Beat, Points illuminate the importance of the law:, , Bitar in the spher, L Helpful in taxation: The Law of Diminishing Marginal Utility is of eer help ia i ‘, of taxation.(T he principle of taxation is that the taxes should be levied accoraing E, people's ability to pay) The rich people must be made to pay more taxes than the poor. So, , the Govt. levies progressive taxes. (The Law of Diminishing Marginal Utility provides a, basis for progressive system of tax,, , 2 Basis of the policy of equal distribution of wealth: Modern capitalist countries suffer, from extreme unequal distribution of wealth and income in the society. Witha view to, reduce the wealth of the rich, the governments levy higher taxes on the rich. The money, thus taken from the rich is distributed to the poor by way of free education, free medical, , ald etc. Thus,(the Governments public expenditure policy is based on the law of, diminishing marginal utility. ) | i, ‘3- Helpful in regulating daily expenditure : his law helps the consy, daily expenditure. As we go on buying more ofa commodity, its marginal utility falls) We, should not buy too much of a particular commodity. We should stop further buying at a, point where marginal utility equals to the price of the commodity., , 4 Determination of market price :{The law can be applied for determining the market price, of commodities) It states that the price of acommodity must fall when its supply increases., 5 Helpful to the monopolist : 6 he Law of Diminishing Marginal Utility helps the MoOnopolist, to charge different prices from different types of people with different incomes in order, , to make maximum profit.) ,, §- Basis of economic laws : The Law of Diminishing Marginal Utility isoneo, laws of Economics. (r his law explains why the demand curve slopes d, , mers to regulate their, , f the fundamental, Ownwards. Law of, ave been, , Consumers Surplus, Law of Equi-marginal Utility, Elasticity of Demand etc.), setivad from the Law of Diminishing Marginal Utility., , \ Theo, Con:, dev, con, acr, , Ne, , sui, ins, , Sa