Exceptions & Criticism of the Law of D.M.U.
Exceptions to the Law of Diminishing Marginal Utility :
Following are the exceptions to the law of diminishing marginal utility :
- Hobbies : In certain hobbies like collection of various stamps and coins, rare paintings, music, reading etc., the law does not hold true because every additional increase in the stock gives more pleasure. This increases marginal However, this violates the assumption of homogeneity and continuity.
- Miser : In the case of a miser, every additional rupee gives him more and more satisfaction. Marginal utility of money tends to increase with an increase in his stock of money. However, this situation ignores the assumption of
- Addictions : It is observed in case of a drunkard that the level of intoxication increases with every additional unit of liquor consumed. So MU received by drunkard may Actually it is only an illusion. This condition is similar to almost all addictions. However, this violates the assumption of rationality.
- Power : This is an exception to the law because when a person acquires power, his lust for power increases. He desires to have more and more of it. However, this again violates the rationality
- Money : It is said that the MU of money never becomes zero. It increases when the stock of money increases. This is because money is a medium of exchange which is used to satisfy various wants. However, according to some economists, this law is applicable to money too. For example, marginal utility of money is more to a poor person than to a rich
However, these, exceptions are only apparent. Since they violate some or the other assumptions of the law and hence, they are not real exceptions.
Criticisms of the Law :
The law of diminishing marginal utility is criticised on the following grounds.
- Unrealistic assumptions : The law of diminishing marginal utility is based upon various assumptions like homogeneity, continuity, constancy, rationality but in reality it is difficult to fulfil all these conditions at a point of time.
- Cardinal measurement : The law assumes that utility can be expressed cardinally so it can be added, compared and presented through a schedule. In reality cardinal measurement of utility is not possible because utility is a psychological
- Indivisible goods : The law is not applicable to indivisible and bulky goods like refrigerator, car, TV sets etc. which are normally purchased in single unit at a
- Constant marginal utility of money : The law assumes that MU of each unit of money remains constant. However, critics argue that MU of money differs from person to It is influenced by changes in prices, stock of money etc.
- A single want : The law is restricted to the satisfaction of a single want at a point of time. However, in reality, a man has to satisfy many wants at a point of time.