1) There is no change in the unit of quantity & quality of commodity consumed by the customer 2) There is no change in taste & preferences of consumer 3) Process of consumption should be continuous 4) The mental condition of the consumer should remain same 5) No change in the price of commodity & its substitute
Assumptions for law of diminishing marginal utility- there are a few assumptions due to which the law will hold, they are as follows- 1. Using standard units of measurement- if too many big or small units are used to measure then the law wont hold. Eg- if water was measured in drops
2.homogeneous commodity- all units of commodity consumed are homogeneous and perfect substitutes.
3.continuous consumption- the law holds only when consumption of commodity is continuous
4.mental and social condition of the consumer must be normal- the law will hold only when the consumers mental condition is normal. His tastes and incomes are unchanged and he is a ratoinal consumer.
The law of diminishing marginal utility is based on the logic that all human wants are manageable. The assumptions of this law are: Suitable units of consumption, a consumer good should be used in suitable units. Thus the size of the unit should neither be too long nor too small. For example if we are taking coke, a glass of coke would be a suitable unit of consumption due to which marginal utility of coke might go up. On the other hand, if the unit of coke is a jug, that is too big unit of consumption. Nature of product remain the same is another assumption to this law. All the units of consumption should be identical. This means that the nature of the product should remain the same. If units of consumption differ in their characteristics this law would be applicable. Consecutive use of the product another assumption. This law will be applicable only if various units of consumption are used consecutively i.e. One after the other. One of the assumptions is mental condition of the consumer should not change. The habits tastes and liking of the consumer should not change or in other words, his mental condition should remain the same. Supposing that after the use of first unit of consumption he comes to know that more and more use of the product is useful for his health.
