Do you know DMU full form?
DMU Full form is diminishing marginal utility.
Utility defines the satisfaction derived from a product. By diminishing marginal utility we mean that the utility of the product decreases with the continual use of that particular product. It can be explained as the change in the utility of the article after every time it is consumed.
The utility may slowly turn negative as the utility goes on decreasing with each consecutive article consumed. Therefore, we can say that the first article consumed provides with the highest utility to the user. Consumers need to be rational and practical enough to understand this phenomenon and change their consumption pattern accordingly.
DMU full form in Hindi: सीमांत उपयोगिता
Under the law of diminishing utility we consider that when another article of the same type is consumed keeping all other factors similar, the marginal value keeps on decreasing subsequently. As the marginal utility keeps on decreasing, it eventually becomes negative.
The law of marginal utility directly relates to the decreasing prices of articles, as the utility of a product decreases resulting in a fall of prices and thus decreasing the sales. Thus, pricing needs to be appropriate and profitable as well.
For example: if we consume one orange, we desire for the orange as we feel hungry it satisfies both are satisfied. When we eat another orange, it affects the hunger to a lesser amount. The want for taste is affected by the same amount.
When we consume the third orange, we are already feeling quite full thus it neither helps with hunger nor with taste satiation. If we try to eat another orange we feel it be a compulsion, as our body feels forced to accept this extra orange.
‘Utils’ is considered as the measurable ‘unit’ of utility. Data for Law of Diminishing Marginal Utility:
|Unit of Consumption||Marginal Utility||Total Utility|
We have drawn up this schedule to describe the diminishing marginal utility. After the saturation the utility starts to decrease, after a certain point of time, it falls below zero.
In the given table, the utility gained from eating the first orange is 20 utils, which keeps on increasing till the saturation point is reached at the 5th orange. We can also see that the marginal utility keeps on diminishing with every additional orange consumed.
Saturation Point: When the marginal utility becomes zero and after the point, it becomes zero.
Disutility: We can say that the when the value of utility turns negative it is known as disutility. We can even say that when the consumption is to be forced it is known as disutility of the product.
In the above-discussed example: When the first orange is eaten, the marginal utility of the orange is 20. When the second orange is eaten, the marginal utility is increased by 15 utils, but the marginal utility is lesser as compared to the marginal utility of the first orange – as rate diminishes. Therefore, the utility of oranges consumed diminishes with an increase in the number of oranges consumed.
Assumptions in the Law of Diminishing Marginal Utility:
For the law to be true, we have to consider certain assumptions. If any assumption fails the law will not hold true. We take into consideration the following assumptions:
- The quality of each unit of good consumed should remain the same over the whole range of time of consumption.
- There should not be any time gap in the consumption of the goods.
- The unit of consumption and quality must remain the same over the time of the experiment.
- Consumer’s mentality should not change. The consumer must be rational.
- Unit of the product must be practical i.e. not very small or quite large.
Exceptions for the Law are discussed as below:
We say that we can consider the law to be true if it fulfills the assumptions but some articles or goods do not hold the law true.
The exceptions for this law are given below:
- The desire for money.
- The desire for knowledge.
- Use of liquor or wine.
- Collection of rare objects.“Stay Informed and connect to Today’s era Full form list for the latest updates.”