There is no time gap between consumption of thdifferent units Consumer is

There is no time gap between consumption of

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goods are homogenous. • There is no time gap between consumption of the different units. • Consumer is rational (So aims at maximization of utility of the product) • Tastes, preferences, and fashion remain unchanged. • Consumers posses perfect knowledge of the price in the market • No price change • It assumes Law of marginal diminishing Utility • Utilities of different commodities are independent of each other 8. Law based upon three facts: The law of diminishing utility is based upon three facts. • Firstly The wants of a man are unlimited but single want can be satisfied. As a man gets more and more units of a commodity, the desire of his want for that good goes on falling. A point is reached when the consumer no longer wants any more units of that good, • Secondly Different goods are
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not perfect substitutes for each other in the satisfaction of various particular wants. • Thirdly There is no change in the tastes of the consumers. 9. Example • Explanation of the Law: Suppose a person is thirsty and the price of water is zero. He takes one glass of water which gives him great satisfaction. We can say the first glass of water has great utility for him. He then takes second glass of water. The utility of the second glass of water is less than that of first glass of water. The utility declines because the edge of his thirst has been blunted to a great extent. If he drinks third glass of water, the utility of the third glass will be less than that of second and so on. The
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