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MarginalUtility
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What do People want from life
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Of course Money, Good House, car, Education etc..
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He Loves Cake
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Infinite Supply of Cakes
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7/34Infinitely Happy
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The Answer is
NOwhy?
Because of
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Law of Diminishing Marginal Utility
the additional utility which a person derive from the consumption a commodity
diminishes, that is Total Utility increase at an diminishing rate
Unit of
Cake
Total
Utility
Marginal
Utility
1 10
2 20
3 29
4 37
5 43
6 48
7 51
8 52
9 52
10 50
MUn= TUnTUn-1
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Law of Diminishing Marginal Utility
the additional utility which a person derive from the consumption a commodity
diminishes, that is Total Utility increase at an diminishing rate
Unit of
Cake
Total
Utility
Marginal
Utility
1 10 10
2 20 10
3 29 9
4 37 8
5 43 6
6 48 5
7 51 3
8 52 1
9 52 0
10 50 -2
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Law of Diminishing Marginal Utility
the additional utility which a person derive from the consumption a commodity
diminishes, that is Total Utility increase at an diminishing rate
Unit of
Cake
Total
Utility
Marginal
Utility
1 10 10
2 20 10
3 29 9
4 37 8
5 43 6
6 48 57 51 3
8 52 1
9 52 0
10 50 -2
TU
MU
No of Cake
No of Cake
TU
MU
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Law of Diminishing Marginal Utility
TU
MU
Saturation Point MU =0 or TU is maximum
TU
MU
No of Cake
No of Cake
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If we go oneating cake after
Achieving zero
utility from it
,It may result in
Negative Utility
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Producers Theory
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What do Producers
want from Business?
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Answer is Simple to
Generate a lot ofRevenue
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How Much
Resource is
to be added
that is very
Important
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Suppose I have a business
And these are my tool for
running the business
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So I hire a worker
Vikash
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Employee Total Product Marginal Product
Zero Employee 0 0
Vikash 6 6
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I hire another worker Anushree
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Employee
Total
Product
Marginal
Product
Zero Employee 0 0
Vikash 6 6
Anushree 14 8
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Hiring of third workerNeha Agarwal
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Employee Total Product Marginal Product
Zero Employee 0 0
Vikash 6 6
Anushree 14 8
Neha Agarwal 21 7
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Hiring of forth Employee
Neha Bharti
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Employee Total Product Marginal Product
Zero Employee 0 0
Vikash 6 6
Anushree 14 8
Neha Agarwal 21 7
Neha Bharti 24 3
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Seeing the Rise in Production
make the Employer happy
Benevolent Dictator Mrigank
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On hiring the fifth workerKriti
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Employee Total Product Marginal ProductZero
Employee 0 0
Vikash 6 6
Anushree 14 8
Neha 1 21 7
Neha 2 24 3
kriti 22 -2
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Reduction in Total Product After
hiring the 5th
worker makes theEmployer Unhappy
Benevolent Dictator Mrigank
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Question arises that whyall this happens?
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Reasons:
Though all the employee had similar
skills but there was reduction in the
total product because of lack of other
resources like computers ,tool, machines
other resources which are necessary for
the running of business.
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0
5
10
15
20
25
30
Total Product
Total Product
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-4
-2
0
2
4
6
8
10
Vikas Anushree NehaAgarwal
NehaBharti
Kriti
Marginal Product
Marginal Product