Precaution of law of equimarginal utility
Law of equimarginal utility is same as any other economic law. Law of equimarginal utility too has certain limitations. The law of equimarginal utility like other laws of economics is also subject to take precaution of law of equi-marginal utility.
This law of equimarginal utility brings tendency among people's same as other economics law. All people must follow law of equimarginal utility is not necessary in allocation of their money income.
All people may not obtain maximum level of satisfaction. This is due to following precaution of law of equimarginal utility.
What are the precaution of law of equimarginal utility and limitations.
(1) For practical application of this law of equimarginal utility in actual life, consumer must do comparison among marginal utilities among various commodities in thinking on his mind.
Consumer for taking this precaution must have to do comparison between various marginal utilities obtained from various commodities.
From the study find out that not every consumer rational or active enough and not always do calculations.
(2) Suppose consumer blindly trust any comodity, customs or tradition, then consumer going to lose their money. To eliminate this type of limitations of equimarginal utility consumer have take precautions of law of equimarginal utility.
Consumer for this limitation of law of equimarginal utility, he must take precautions like never trust any customs or commodities blindly.
(3) The law of equimarginal utility another limitation that many time goods are indivisible. indivisibility of goods make to equate money marginal utility spent on them.
To overcome this limitation of law of equimarginal utility, consumer must take precautions in making selection to calculate marginal utility of any comodity.
For an example, buying of two'wheeler and vegetables, here marginal utility finding cannot be possible. Cost of buying two wheeler is fixed suppose 80000 and it is indivisible. On the other hands cost of vegetables can be breakdown or divisible.
Law Of Equimarginal Utility Explanation
Law of equimarginal utility deals with how can consumers used his money of income in such manner which provide equal utility from last of commodity consumption.
Law of equimarginal utility gives an idea of managed use of money by equal distribution of consumer income over various types of commodities in a manner which provide equal level of equimarginal utility from last unit just same as first unit of consumption of goods.
Law of equimarginal utility helps the consumers to derive maximum level of satisfaction. Law of equimarginal utility was given by great economist Alfred Marshall.
In law of equimarginal utility consumer gets opportunity to make selection of suitable commodity which consists of higher equimarginal utility.
Use of opportunity cost concept can also understand with the help of law of equimarginal utility.
Law of equimarginal utility also pronounced as other name of law of substitution and law of maximum satisfaction.
How to maximize utility
Utility of any commodity can be maximize after understanding complete explanation of law of equimarginal utility. We can maximize our degree of utility after making accurate selection of those commodity which provides higher equimarginal utility.
For example suppose consumer want to buy mobile phone and went to mobile shop. In mobile phone shop consumer asked shopkeeper to show best companies mobile brands.
Here consumer have fixed amount of money to spend on mobile purchase. Shopkeeper shown company A mobile and company B mobile phone.
Consumer will make selection of those mobile phone from which consumer dervmivevviwhich provides maximum level of equimarginal utility at cheapest cost.
What are the limitations of law of equimarginal utility
In this world various types of law followed by peoples according to time profit and positive effect. Like every other laws of Economic this law of equimarginal utility also have limitations.
Consumer have to take precautions of equimarginal utility to manage limitations.
Law Of Diminishing Marginal Utility
In economics law of equimarginal utility study with law of diminishing marginal utility. Law of diminishing marginal tell us when we consume extra unit of goods then marginal utility of that goods starts decline.
At starting of any goods and services before consumption done by consumer its margin utility maximum. Which means marginal utility is at maximum level before get consumed up.
Why AR lies below MR curve below?
When we study law diminishing marginal utility, then we plot a graph of factor product relationship.
In first stage (irrational stage Ist). Now here is answer at starting of any new business its production output very high due to this marginal revenue unit high and average revenue at starting of buisness low as compared to marginal revenue.
Due to these reasons MR curve lies above AR curve but less than total Physical Product (TPP).
Conclusion
The law of equimarginal utility is same as any other law of economics. There many limitations of this law of equimarginal utility. To overcome the these limitations of this law consumer must take precautions of law of equimarginal utility. Above mentioned precaution of equimarginal utility will help consumers to use equimarginal utility law in real life more easily.