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The equi-marginal principle states that a consumer will be maximizing his total utility when he allocates his fixed money income in such a way that the utility derived from the last unit of money spent on each good is equal.
- Law of Equimarginal Utility: Explanation ... - Economics Discussion
The Law of equimarginal Utility is another fundamental...
- The Law of Equi-Marginal Utility (With Explanation) - Economics Discussion
The law of equi-marginal utility states that the...
- Law of Equimarginal Utility: Explanation ... - Economics Discussion
Definition, explanation and assumptions of law of equi marginal utility. The law of equi-marginal utility is simply an extension of diminishing marginal utility to two or more than two commodities.
10 Αυγ 2023 · The equimarginal principle states that by keeping other things constant, if a consumer spends his income on different commodities, he or she will get maximum satisfaction when marginal utility per unit of money is the same for each commodity. This principle is also known as the law of substitution or the law of maximum satisfaction.
The Law of Substitution states that in order to get maximum satisfaction, a consumer should spend his limited income on different commodities in such a way that the last dollar spent on each commodity yield him equal marginal utility.
Marginal utility generally decreases as more units are consumed due to the principle of diminishing marginal utility. Marginal utility is calculated by subtracting the total utility of the previous consumption level from the total utility of the current consumption level.
The Law of equimarginal Utility is another fundamental principle of Economics. This law is also known as the Law of substitution or the Law of Maximum Satisfaction. We know that human wants are unlimited whereas the means to satisfy these wants are strictly limited.
The law of equi-marginal utility states that the equalisation of marginal utility in all the cases of purchases maximises total utility and thus the total satisfaction of a consumer. However, ‘utility’ and ‘satisfaction’ are not the same thing; so the maximisation of utility may not lead to the maximisation of satisfaction.
