The Law of Demand Versus Diminishing Marginal Utility

Diminishing marginal utility 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 diminishing marginal utility. The examples are accompanied with the geometry and basic mathematics of the utility functions and the implied ordinary/Marshallian demands.


Issue Date:
2005
Publication Type:
Working or Discussion Paper
PURL Identifier:
http://purl.umn.edu/25013
Total Pages:
20
JEL Codes:
A22
Series Statement:
CUDARE Working Paper 959R




 Record created 2017-04-01, last modified 2017-08-24

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