A

PROJECT REPORT

ON

“MARGINAL UTILITY DECREASES FROM THE VERY

SECOND UNIT OF CONSUMPTION BUT EXCEPTIONAL
CASES MAY HAPPEN”

Under the guidance of

FACULTY CO-ORDINATOR
MR.SUNIL KAKKAR G

SUBMITTED BY:
SHYAM SUNDER GUPTA

PGDM 1ST Sem- (2008-2010) SEC -B

----------------------------------------------------------------

Maharishi Arvind Institute of Science &

Management
Ambabari Circle, Bharti Path, Ambabari, Jaipur-302023 (INDIA)
Tel: +91-141-2335487, 2234216 - Telefax: +91-141-2335120
E-mail: maism@datainfosys.net Website: www.maism.com
 CONTENTS

THEORY:

What is Marginal Utility?

Law of Diminishing Marginal Utility.
Assumptions of the Law of DMU.
Exceptions of Law of DMU.
Law of Equi-Marginal Utility.
Assumptions of the Law of EMU.
INTRODUCTION OF THE PROJECT.

Topic of the Project

Objective
Scope
Significance
Data Interpretation and analysis.

ANNEXURE:

List of Respondents
Specimen of Questionnaire.

CONCLUSION

UTILITY
It is the want satisfying property of a commodity. It is the psychological
feeling of satisfaction, pleasure, happiness, which a consumer derives from
consumption ,possession, or use of a particular commodity.
WHAT IS MARGINAL UTILITY?

Is an important concept used in economic analysis.

A. Marginal Utility (MU) refers to additional utility when one unit of a commodity
is consumed.
B. It may also be defined as change in the Total Utility i.e. (Δ TU) obtained from the
consumption of an additional unit of a commodity. It is expressed as
• MU = ΔTP
o ΔQ
C.where TU = total utility, and ΔQ = change in quantity consumed by one unit.
Another way of expressing Marginal Utility (MU), when the number of units consumed is
nth unit = TUn - TUn

Law of Diminishing Marginal Utility

 This law states that as the quantity consumed of a commodity increases, the utility
derived from each successive unit decreases , consumption of all other
commodities remaining the same.

 In simple words, when a person consumes more and more units of a commodity
per unit of time, e.g., ice cream, keeping the consumption of all other commodities
constant, the utility which he derives from the successive units of consumption
goes on diminishing.

Total and Marginal Utility Schedules

No.of unit Consumed Total Utility Marginal Utility

1 8 8
2 14 6
3 18 4
4 20 2
5 20 0
6 18 -2
 As shown in the table, with the increase in the number of units consumed per unit of time,
the TU increases but at a diminishing rate
Assumptions of the law:
 Unit of the consumer good must be a standard one.
 Consumer’s preference or taste should remain same during period of consumption.
 There must be continuity in consumption.
 Mental condition of consumer must remain normal during period of consumption.

Exceptions to the law;

 The law does not apply to the commodities which are used as a status symbol.
 For the goods whose price might change in future.
 Is not applied in the case of Giffen goods.
 Consumption of very small units of commodity.
 The Law does not hold to the complementary goods.
 Personal habits (addiction)

CRITICISMS OF THE LAW

 Utility is not measurable.

 Marginal utility of money does not always remains constant.
 This Law is based on the nature of the consumer.
LAW OF EQUI-MARGINAL UTILITY

 This Law states that a consumer consumes various goods in such quantities that the
MU derived per unit of expenditure on each good is the same.
 In other words, a rational consumer spend his income on various goods he consumes in
such a manner that each rupee spent on each good yield the same MU.
 Thus, the consumer will be in equilibrium when he is spending his given money
income in such a manner that the following equation holds good.
MUx = Px
MUy Py

LAW OF D.M.U
  Rational human behavior.
 No change in the price of related goods.
 No change in taste. Fashion, and income of the consumer.
 Utility is measurable.
 Marginal Utility of money is constant.

CRITICISIMS OF THE LAW

 Change in the price of the related good.
 Non- availability of goods.
 Unrealistic assumptions.
 All human beings are not rational.

Objective: - I have explained the law of diminishing marginal utility above. This survey has been
performed to testify the fact of existence of exceptions to this law.

Scope: - The law of diminishing marginal utility is very comprehensive and a well pervasive law of
micro-economics which applies to every single consumption by any living being. The consumption may
cover consumption of food, clothes, jewelry, automobiles, cell phones, etc.

Significance: - The law of diminishing marginal utility is very important law of micro-economics.
Following points show the significance of application of this law:-

• Product planning
This law holds prime importance in understanding consumer behavior in respect of the
consumption of any commodity. The application of this law facilitates the product planning by
the various organizations;

• Product innovation
This law also facilitates product innovation by various organizations. By understanding the
consumption and satisfaction pattern of any particular product, organizations can make timely
changes into the products so that the consumers can be attracted for the consumption.

• Sales Promotion
This law is very useful for sales promotion. Normally the demand of the commodity may be
increased by reducing its price.
 • Price Determination
This law is helpful for determination of the prices also. The maximum price of any commodity
will depend upon the marginal utility derived from it. The price of no commodity is higher than
the marginal utility obtained by the consumer from it. That is why. When production of a
commodity is in high quantity, its price is low and when production is low, its price normally
becomes high

DATA ANALYSIS AND INTERPRETATION

Table-1 for all the Products available in the Project
S.no. Product Behaving Behaving Behaving Product
Specification normally exceptionally(in constant(in category
(in times) times) times)
1 Bear II
2 Juice III
3 Lassi I
4 Bhel puri II
5 Tea II III
6 Upma I
7 Apple I
8 Pani puri I III
9 Rice I
10 Papaya I
11 Dal roti II III
12 Coffee IIII
13 Chawmeen I I
14 Gajak II
15 Gajar’halwa I III
16 Fruits I II
17 Dalbati I
18 Breads II I
19 choorama II
20 Chocolates IIIIIIII
21 Paw bhaji III II
22 Jalebi II
23 rasmalai I
24 Snacs IIII
25 Pizza I I
26 Chicken I
27 Cigarettes III
28 Phetha I
29 Kurkure I
30 Chole bhature I
31 Milk IIIIII
32 cachori I II
33 Namkeen II
34 Kaju katali I IIIII
35 Paneer II
36 icecream II
37 Maggi II IIIIII
38 Patties I IIIII
39 Banana IIII
40 Samosa III IIII
Table 2 – Top Ten products behaving exceptionally (with graphs)

Product Behaving Behaving Behaving Product

S.no. specification exceptionally(in normally constant(in category
times) (in times)
times)
1 Cigarettes IIII
2 Alcoholic II
drinks
3 Cold drink IIIIII I
4 Tikki I III
5 Tea III II
6 Dosa II III
7 Coffee IIII

CIGRATE

EXCEPTION CASE 100%

-EXCEPTION
 COLD DRINK

NORMAL
15%

EXCEPTIONAL
NORMAL

EXCEPTIONAL
85%

TIKKI

EXCEPTIONAL
25%

EXCEPTIONAL
NORMAL

NORMAL
75%
 TEA

NORMAL
40% EXCEPTIONAL
NORMAL
EXCEPTIONAL
60%

COFEE

NORMAL
0%

EXCEPTIONAL
NORMAL

EXCEPTIONAL
100%
 Table 3 – Top Five products behaving normally (with graphs)

S. No. Product Behaving Behaving Behaving Product

Specificati Normally (in exceptionall constant(in category
on times) y(in times) times)
(show in tally
marks –
repeatedness
in whole
project)
1 Paw bhaji III II
2 Idli II I
sambhar
3 Samosa III II
4 Dosa III II
5 bhelpuri II
EXCEPTIONAL
34%
pawbhaji
EXCEPTIO
B NORMAL

NORMAL
66%
exceptional
40%

NORMAL
60%
 SAMOSA

EXCEPTIONAL
40%
EXCEPTIONAL
NORMAL
NORMAL
60%

Dosa

EXCEPTIONAL
40%
EXCEPTIONAL
NORMAL
NORMAL
60%
 EXCEPTIONAL
34%

BHELPURIi EXCEPTIO
B NORMAL
EXCEPTIONAL
NORMAL 0%
66%

EXCEPTIONAL
NORMAL

NORMAL
100%
SI.NO Name of consumer Product name Address
Nikhil Bear,juice,pawbhaji 54,jagdamba 9351918016
1 khandelwal colony naya
kheda
2 Sita devi Rasgulla,phetha Plot no-23
laxmi colony
3 Usha devi Idli,sambhar,rasgulla, Jagdamba 0141-
cachori colony naya 2336760
kheda
4 Sita ram Khir,gajar’halwa,dal-bati 56, jagdamba
jhalani colony
5 Nidhi Gajar’halwa, chawmean, Sector 2 naya
khandelwal paw-bhaji kheda
vidhadhar
nagar
6 Bhupendra Pawbhaji,tikki,kachori c-63 vijay 9351181188
singh bihar colony
naya kheda
EXCEPTIONAL
7 Vijendra Kachori,tea,dal ki pakodi Vijay bihar
34%
singh colony main
road
8 Ajitesh Fruits,cold-drink,snacs b-36 naya EXCEPTIO
B kheda NORMAL
9 Praveen Breads,milk,banana 57-jagdamba
NORMAL
gupta colony naya
66% kheda
10 Ankita Kurkure,coffee,upma 1148-chandpol 983712507
. kumara market 6

11 Vijay kumar Chole-bhature,magi,tikki C-14 vijay 9928395861

jain bihar colony
12 Shamhudayal Samosa,gulab- C-14 vijay
jamun,namkeen bihar colony
13 Rad-dhir Apple,bread,banana Near the 982919539
singh khandelwal
tawar
14 Ravi sharma Noodals,tikki,bhelpuri c-3b naya 9799138077
kheda
ambabari
15 Sanjay Milk,dal-roti,tea Near the 9314137990
maheswari khandelwal
tawar
16 Santosh Choorma,bread, jalebi Near mahendra 9314137990
maheswari public school
k.t
17 Kamal Noodals,kaju-katali,cold Gandhi 09719398798
mahibar drink chauraha
samsabad agra
18 Poonam g Kaju-katali,idli- Gopal-pura 09957674589
sambhar,dosa agara road
samsabad agra
19 Nimit gupta Dosa,samosa,chawmean Near the svm 09358607267
school agra
20 Akhilesh jain Paneer,noodals,gajak Ram nagar 9887024491
colony gate
sanganerigate
21 Madan yadav Dosa,pizza,samosa d-16 shiv marg 9998389183
naya kheda
22 Mukesh lal Munga’halwa,juice,cachori d-14 shyam 09219963080
yadav vihar colony
23 Girish chand Milk,banana,papaya c-23 shiv marg 9983850005
saini naya kheda
24 Raj jain Dal rice,gobhi Mall road near 9214306544
radhe bakers
25 Mahesh jain Bhelpuri,choklate, cigrate Mall road e-46 9214934728
 naya kheda
26 Ramesh Samosa,jalebi, pawbhaji Pawan juice 0141-
kumawat bhandar 3233029
27 Raj sahib Chiken,samosa, ice- a-2 block naya 9314524713
jhalani cream kheda
28 Munnalal Ice-cream,toffee,tikki a-54 naya 9314120532
sharma kheda
29 Anurag g Lassi,cigrate,idli Shastri nagar 9314283399
jaipur
30 Brajesh Choorma noodals,milk- Vijay bihar 9252594840
shek colony naya
kheda
31 Shankar saini Milk,choclate,soft-drink Near the 9602861677
hanuman
mandir
ambabari

32 Netra pal Coffee,kajoo,drink c-6manpur 9413932700

singh road shiv marg
amb
33 k.m agrawal Aalu’s c-5 shiv marg 9414369047
paratha,rasmalai,barfi
34 Rajiv Kaju-katali,drink,samosa b-12 naya 9252134811
bhardwaj kheda
35 Harshah Matar Near the
kumawat paneer,egg,bread&butter mahendra
public school
36 Ram singh Dal-roti,banana,juice 23 jagdamba
colony
37 Ram nath Mung’halwa,gajak, dosa s-56 ambabadi
gupta
38 Abha gupta Namkeen,chocklate 110,vidhyadhar 9214525501
nagar
39 Adarsh Drink,patiz 988702491
 40 Ashwani g Patiz,samosa,buscuit 9251393870
41 Sajjan Noodals,biscuit, choclate 9887511366
gautam
42 Jitesh Parikh Tea,juice,pawbhaji Near the biyani 9799727502
S.no. college
43 Kapil sharma Dosa,cold-drink,chawmen 9828334422
1 Bear
44 Vijendra g Patiz,choclate,tea
2 Juice 9887975595
45 Himanshu Drink,noodals,bargar
4 Bhel puri 9314873134
Sulabh gupta 5 choclate,patiz
Cold drink Tea e-25 biyani 9460118286
6 Upma
7 Apple college
47 Deepak Hot-dog,halwa,patiz
8 Pani puri 9829607077
kathod 9 Rice
10 Papaya
11 Dal roti
12 Coffee
13 Chawmeen
14 Gajak
15 Gajar’halwa
List of Products 16 Fruits
17 Dalbati
18 Breads
SPECIME
19 choorama
N OF THE 20 Chocolates
QUESTIONNAIRE 21 Paw bhaji
22 Jalebi
23 rasmalai
24 Snacs
P 25 Pizza
ROJECT 26 Chicken
27 Cigarettes
28 Phetha
DECLINES FROM THE 29 Kurkure
SECOND UNIT OF 30 Chole bhature
CONSUMPTION 31 Milk
32 cachori
AND 33 Namkeen
EXCEPTIONAL CASES MAY 34 Kaju katali
HAPPEN. 35 Paneer
36 icecream
37 Maggi
38 Patties
39 Banana
40 Samosa
41 Patta ghobhi
NAME OF CONSUMER: CONTACT NO:
AGE OF CONSUMER : ADDRESS :
OCCUPATION :

Q.1 WHICH THREE PRODUCTS OR COMMODITIES DO YOU LIKE TO

CONSUME REGULARLY AT
YOUR HIGH INTEREST ?

PRODUCTS
NAME

Q.2 RANK THESE PRODUCTS OR COMMODITIES .

RANKING OF 1st 2nd 3rd

PRODUCT

Q.3 SUPPOSE IN RANK NO. ONE/ TWO/ THREE PRODUCT OR

COMMODITY
YOUR SATISFACTION LEVEL ARE WITH A CONSUMPTION OF ONE
UNIT IS 50. WHAT DO YOU FEEL ABOUT THE SECOND UNIT OF
CONSUMPTION AND SO ON ?
RANKING OF PRODUCT RANKING OF PRODUCT RANKING OF PRODUCT

1st 2nd 3rd

UNITS MU UNITS MU UNITS MU

1 1 1
 2 2 2
3 3 3
4 4 4
5 5 5
6 6 6
7 7 7
8 8 8
9 9 9
10 10 10

COMMENTS / ANALYSYS

CONCL
USION

To get the very crux of any topic it is quite fruitful to practically apply that
concept. The project of consumers’ survey regarding their taste and
preferences developed a clear understanding of the topic There is a lot of
learning involved in doing so and we also learned so many things while
interacting directly with the consumers.