A Project Report

On

“ Testing law of
diminishingMARGINAL UTILITY”

Maharishi Arvind Institute of Science & Management

Ambabari Circle, Bharti Path, Ambabari, Jaipur-302023 (INDIA)
Tel: +91-141-2335487, 2234216 - Telefax: +91-141-2335120

Submitted To: Submitted By:

Mr.Sunil Kakkar Sir Pgdm first sem.

ACKNOWLEDGEMENT
I would like to express my gratitude to all those who gave me the
possibility to complete this project.

I would like to thanks to my seniors who help me a lot in making of

this project successfully. My classmates who help me in
understanding this project deeply.

But I would like to thanks especially to Sunil Kakkar – Faculty –

Deptt. Of management studies, who gave this opportunity to us so
that we were able to make this project easily and from now we have
learnt how to make these types of project further successfully.

PREFACE
Economics is the science which studies human behaviour
as a relationship between ends & scarce means which
have alternative uses.

This project includes study of Marginal

utility laws & consumer behaviour with respect to various
commodities or products. This project tells that what can
be demand for a particular product which is consumed
by consumer on regular basis. In preparation of the
project, I have consulted several sources which have
been acknowledge at relevant contexts.

The survey related with this project was conducted in various

areas of Rajasthan state.

Marginal utility
Marginal utility is the additional utility / satisfaction
derived when one more unit of the commodity is
consumed. It is also defined as the utility derived from
the marginal unit consumed.
Another definition of marginal utility is that it is
the addition to the total utility resulting from the
consumption (or accumulation) of one additional unit.
It is thus refers to the change in the Total Utility
obtained from the consumption of an additional unit
of a commodity.

MU = ΔTU/ΔQ

Where, ΔTU = change in total utility and ΔQ= change in the

quantity consumed by one unit.
 LAW OF DIMINISHING MARGINAL
UTILITY (LDMU)

“As consumer increases the consumption of anyone commodity,

keeping constant consumption of all other commodities, the
marginal utility of the variable commodity must eventually
decline... -Prof. Boulding

“The extra satisfaction derived from the consumption of additional

units of any commodity tends to decline as the quantity consumed
increases.”- Prof. Nevin
 Law of DMU → Consumer Behaviour with
single commodity

In simple words we can say that when a person consumes more

and more units of a commodity per unit of time, keeping
the consumption of all other commodities constant, the utility
which he derives from the successive units of consumption goes
on diminishing. This law applies to all kinds of consumer goods –
durable as well as non-durable.

INTRODUCTION:

TOPIC:

MARGINAL UTILITY DECREASES FROM THE VERY SECOND UNIT OF CONSUMPTION BUT
EXCEPTIONAL CASES MAY HAPPEN
OBJECTIVE

The main objective of this project is to experimentally and practically determine how MU decreases
with the consumption of units.

SIGNIFICANCE

1. This research is important to know about the exceptional case of DMUs

2. This research is beneficial to know that though human wants are unlimited and infinite but a
specific  or a particular human want is satiable.
3. It is important to note that what a consumer is prepared to pay for a product is nothing but
the marginal utility of that product, that’s why this research is important because it provide
information regarding marginal utility of product.
4. This research is beneficial to know fundamental and obivious human nature and behavior
that more he has a thing less he want for that thing and vice versa.

SCOPE

1. This research has scope in the field of demand, determination of demand, demand
forecasting as we know taste habits and preferences of consumer from this research.
2. This research has scope in the field of production as it provides utility of particular product.
3. Research has wide scope in the field of the consumer behaviour and market research as it
provides the information regarding the consumer behaviour towards the product.

This research can be utilized in the field of marketing i.e. by giving more utility of a product marketer
protect a commodity from its saturation point up to some level

QUESTIONER
CONSUMER SATISFACTION SURVEY ON
LAW OF DIMINISHING MARGINAL UTILITY.

Name:
Address:
Phone no: Age Group:

Q1 Do you know what is diminishing marginal utility?

Yes No

Q2 which eatables or consumable commodity you like the most at frequent interval?
1. 2.
3. 4.

Q3 Suppose you are getting a level of satisfaction in unit, say starting from80?

Unsatisfied Neutral Low Satisfied Satisfied very satisfied highly satisfied

-20 0 20 40 60 80

Preference:-

Commodity Satisfaction
Unit
1.
2.
3.
4.
5.
6.
7.
8.

Interpretation of case 1

Details recorded for case 1 – Consumption of Icecream, testing Law

of Marginal Utility :

Commodity Unit Satisfaction

1 60
2 45
 3 20
4 10
5 0
6 -10
7 -20

First case is verifying the law, i.e. marginal utility derived from the
second unit of consumption is declining and goes to negative.

To conclude, Case is the clear example of consuming normal

commodity.

Interpretation of case 2

Details recorded for case 1 – Consumption of golgappa, testing Law

of Marginal Utility :

Commodity Unit Satisfaction

1 80
2 75
3 60
4 50
5 40
 6 30
7 20

First case is verifying the law, i.e. marginal utility derived from the
second unit of consumption is declining and goes to negative.

To conclude, Case is the clear example of consuming normal

commodity.

Interpretation of case 3

Details recorded for case 3 – Consumption of colddrink, testing Law

of Marginal Utility :

Commodity Unit Satisfaction

1 60
2 50
3 40
4 30
5 0
6 -5
 7 -10

First case is verifying the law, i.e. marginal utility derived from the
second unit of consumption is declining and goes to negative.

To conclude, Case is the clear example of consuming normal

commodity.

Interpretation of case 4

Details recorded for case 4 – Consumption of coffee, testing Law of

Marginal Utility :

Commodity Unit Satisfaction

1 60
2 40
3 25
4 10
5 0
6 -2
7 -4
First case is verifying the law, i.e. marginal utility derived from the
second unit of consumption is declining and goes to negative.

To conclude, Case is the clear example of consuming normal

commodity.

Interpretation of case 5

Details recorded for case 5 – Consumption of idli, testing Law of

Marginal Utility :

Commodity Unit Satisfaction

1 100
2 80
3 70
4 50
5 40
6 25
7 10

First case is verifying the law, i.e. marginal utility derived from the
second unit of consumption is declining and goes to negative.
To conclude, Case is the clear example of consuming normal
commodity.

Interpretation of case 6

Details recorded for case 6 – Consumption of choclate, testing Law of

Marginal Utility :

Commodity Unit Satisfaction

1 60
2 45
3 30
4 20
5 10
6 0
7 -10

First case is verifying the law, i.e. marginal utility derived from the
second unit of consumption is declining and goes to negative.

To conclude, Case is the clear example of consuming normal

commodity.
 Interpretation of case 7

Details recorded for case 7 – Consumption of snacks, testing Law of

Marginal Utility :

Commodity Unit Satisfaction

1 70
2 60
3 55
4 40
5 32
6 20
7 10

First case is verifying the law, i.e. marginal utility derived from the
second unit of consumption is declining and goes to negative.

To conclude, Case is the clear example of consuming normal

commodity.
 Interpretation of case 8

Details recorded for case 8 – Consumption of namkeen, testing Law

of Marginal Utility :

Commodity Unit Satisfaction

1 40
2 35
3 20
4 10
5 0
6 -2
7 -4

First case is verifying the law, i.e. marginal utility derived from the
second unit of consumption is declining and goes to negative.

To conclude, Case is the clear example of consuming normal

commodity.
 Interpretation of case 9

Details recorded for case 9 – Consumption of burger, testing Law of

Marginal Utility :

Commodity Unit Satisfaction

1 60
2 40
3 35
4 15
5 0
6 -1
7 -4

First case is verifying the law, i.e. marginal utility derived from the
second unit of consumption is declining and goes to negative.

To conclude, Case is the clear example of consuming normal

commodity.
 Interpretation of case 10

Details recorded for case 10 – Consumption of cigarate, testing Law

of Marginal Utility :

Commodity Unit Satisfaction

1 40
2 60
3 80
4 65
5 50
6 45
7 30

This case is exception to the law that is law of marginal utility. in this
marginal utility first increases then decreases and goes to negative.

To conclude, Case is the clear example of exception .

 Interpretation of case 11

Details recorded for case 11 – Consumption of tea, testing Law of

Marginal Utility :

Commodity Unit Satisfaction

1 80
2 65
3 45
4 35
5 15
6 0
7 -10

eleven case is verifying the law, i.e. marginal utility derived from the
second unit of consumption is declining and goes to negative.

To conclude, Case is the clear example of consuming normal

commodity.

Interpretation of case 12
Details recorded for case 12 – Consumption of coffee, testing Law of
Marginal Utility :

Commodity Unit Satisfaction

1 60
2 50
3 40
4 35
5 20
6 10
7 0

twelve case is verifying the law, i.e. marginal utility derived from the
second unit of consumption is declining and goes to negative.

To conclude, Case is the clear example of consuming normal

commodity.

Interpretation of case 13

Details recorded for case 13 – Consumption of pakoda, testing Law of

Marginal Utility :
 Commodity Unit Satisfaction
1 80
2 60
3 55
4 50
5 40
6 20
7 10

thirteen case is verifying the law, i.e. marginal utility derived from
the second unit of consumption is declining and goes to negative.

To conclude, Case is the clear example of consuming normal

commodity.

Interpretation of case 14

Details recorded for case 14 – Consumption of samosa, testing Law

of Marginal Utility :

Commodity Unit Satisfaction

1 80
 2 70
3 55
4 35
5 20
6 10
7 0

Fourteen case is verifying the law, i.e. marginal utility derived from
the second unit of consumption is declining and goes to negative.

To conclude, Case is the clear example of consuming normal

commodity.

Interpretation of case 15

Details recorded for case 15 – Consumption of tea, testing Law of

Marginal Utility :

Commodity Unit Satisfaction

1 60
2 45
3 20
4 10
 5 0
6 -5
7 -10

case is verifying the law, i.e. marginal utility derived from the second
unit of consumption is declining and goes to negative.

To conclude, Case is the clear example of consuming normal

commodity.

Interpretation of case 16

Details recorded for case 16 – Consumption of snacks, testing Law of

Marginal Utility :

Commodity Unit Satisfaction

1 80
2 75
3 56
4 45
5 30
6 25
7 15
case is verifying the law, i.e. marginal utility derived from the second
unit of consumption is declining and goes to negative.

To conclude, Case is the clear example of consuming normal

commodity.

Interpretation of case 17

Details recorded for case 1 – Consumption of Hotdog, testing Law of

Marginal Utility :

Commodity Unit Satisfaction

1 60
2 40
3 30
4 10
5 0
6 -10
7 -15

case is verifying the law, i.e. marginal utility derived from the second
unit of consumption is declining and goes to negative.
To conclude, Case is the clear example of consuming normal
commodity.

Interpretation of case 18

Details recorded for case 18 – Consumption of sweet, testing Law of

Marginal Utility :

Commodity Unit Satisfaction

1 80
2 75
3 60
4 40
5 35
6 20
7 0

case is verifying the law, i.e. marginal utility derived from the second
unit of consumption is declining and goes to negative.

To conclude, Case is the clear example of consuming normal

commodity.
 Interpretation of case 19

Details recorded for case 19 – Consumption of choclate, testing Law

of Marginal Utility :

Commodity Unit Satisfaction

1 90
2 80
3 65
4 50
5 40
6 30
7 20

case is verifying the law, i.e. marginal utility derived from the second
unit of consumption is declining and goes to negative.

To conclude, Case is the clear example of consuming normal

commodity.
 Interpretation of case 20

Details recorded for case 20 – Consumption of Hard drink, testing

Law of Marginal Utility :

Commodity Unit Satisfaction

1 60
2 75
3 80
4 84
5 70
6 65
7 50

This case is exception to the law that is law of marginal utility. in this
marginal utility first increases then decreases and goes to negative.

To conclude, Case is the clear example of exception.

 Interpretation of case 21

Details recorded for case 21 – Consumption of paratha, testing Law

of Marginal Utility :

Commodity Unit Satisfaction

1 40
2 35
3 20
4 10
5 0
6 -2
7 -5

case is verifying the law, i.e. marginal utility derived from the second
unit of consumption is declining and goes to negative.

To conclude, Case is the clear example of consuming normal

commodity.
 Interpretation of case 22

Details recorded for case 22 – Consumption of tea, testing Law of

Marginal Utility :

Commodity Unit Satisfaction

1 80
2 70
3 40
4 25
5 15
6 0
7 -10

case is verifying the law, i.e. marginal utility derived from the second
unit of consumption is declining and goes to negative.

To conclude, Case is the clear example of consuming normal

commodity.
 Interpretation of case 23

Details recorded for case 23 – Consumption of sweet, testing Law of

Marginal Utility :

Commodity Unit Satisfaction

1 60
2 45
3 20
4 10
5 0
6 -5
7 -10

case is verifying the law, i.e. marginal utility derived from the second
unit of consumption is declining and goes to negative.

To conclude, Case is the clear example of consuming normal

commodity.

Interpretation of case 24
Details recorded for case 24 – Consumption of hotdog, testing Law
of Marginal Utility :

Commodity Unit Satisfaction

1 40
2 30
3 25
4 15
5 0
6 -1
7 -2

case is verifying the law, i.e. marginal utility derived from the second
unit of consumption is declining and goes to negative.

To conclude, Case is the clear example of consuming normal

commodity.

Interpretation of case 25

Details recorded for case 25 – Consumption of coffee, testing Law of

Marginal Utility :
 Commodity Unit Satisfaction
1 60
2 50
3 38
4 30
5 15
6 0
7 -2

case is verifying the law, i.e. marginal utility derived from the second
unit of consumption is declining and goes to negative.

To conclude, Case is the clear example of consuming normal

commodity.

Interpretation of case 26

Details recorded for case 26 – Consumption of tea, testing Law of

Marginal Utility :

Commodity Unit Satisfaction

1 60
 2 45
3 30
4 19
5 0
6 -10
7 -20

case is verifying the law, i.e. marginal utility derived from the second
unit of consumption is declining and goes to negative.

To conclude, Case is the clear example of consuming normal

commodity.

Interpretation of case 27

Details recorded for case 27 – Consumption of ice-cream, testing

Law of Marginal Utility :

Commodity Unit Satisfaction

 1 40
2 35
3 20
4 10
5 0
6 -2
7 -6

case is verifying the law, i.e. marginal utility derived from the second
unit of consumption is declining and goes to negative.

To conclude, Case is the clear example of consuming normal

commodity.

Interpretation of case 28

Details recorded for case 28 – Consumption of panipuri, testing Law

of Marginal Utility :

Commodity Unit Satisfaction

1 80
 2 65
3 40
4 30
5 15
6 10
7 0

case is verifying the law, i.e. marginal utility derived from the second
unit of consumption is declining and goes to negative.

To conclude, Case is the clear example of consuming normal

commodity.

Interpretation of case 29

Details recorded for case 29 – Consumption of burger, testing Law of

Marginal Utility :

Commodity Unit Satisfaction

1 60
2 50
3 40
4 30
5 15
6 10
 7 0

case is verifying the law, i.e. marginal utility derived from the second
unit of consumption is declining and goes to negative.

To conclude, Case is the clear example of consuming normal

commodity.

Interpretation of case 30

Details recorded for case 30 – Consumption of tea, testing Law of

Marginal Utility :

Commodity Unit Satisfaction

1 40
2 35
3 20
4 10
5 0
6 -2
7 -5
case is verifying the law, i.e. marginal utility derived from the second
unit of consumption is declining and goes to negative.

To conclude, Case is the clear example of consuming normal

commodity.

Summary of findings
1) Percentage of normal and exceptional cases out of the total sample size.
Graphical representation with interpretation
2) To conclude for normal cases and exceptional cases separately.
3) Listing of normal and exceptional cases.

Conclusion

At last we can say that L.D.M.U. law does n

ot follow every time. Because there is no. of
products which do not follow the law of
diminishing marginal utility and give rise to
exception cases Like cigarette, liquor considering
all assumption of L.D.M.U.
 Marginal utility schedule.

NUMBER OF UNITS MARGINAL UTILITY

1 30
2 20
3 10
4 5
5 -5
6 -15
 Marginal utility
40

30

20

MU
10

0
1 2 3 4 5 6

-10

-20