The Law of Demand versus Diminishing Marginal Utility |
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| Authors: | Bruce R. Beattie Jeffrey T. LaFrance |
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| Affiliation: | Bruce R. Beattie is a professor in the Department of Agricultural and Resource Economics at The University of Arizona.;Jeffrey T. LaFrance is a professor in the Department of Agricultural and Resource Economics and a member of the Giannini Foundation of Agricultural Economics at the University of California, Berkeley. |
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| Abstract: | ![]()
Diminishing marginal utility (DMU) is neither necessary nor sufficient for downward-sloping demand. Yet, upper-division undergraduate and beginning graduate students often presume otherwise. This paper provides two simple counter-examples that can be used to help students understand that the Law of Demand does not depend on DMU. The examples are accompanied with the geometry and basic mathematics of the utility functions and the implied ordinary/Marshallian demands. |
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