The Law of Demand Versus Diminishing Marginal Utility

17 Pages Posted: 12 Jan 2004

See all articles by Bruce R. Beattie

Bruce R. Beattie

University of Arizona - Department of Agricultural and Resource Economics

Jeffrey T. LaFrance

University of California, Berkeley

Date Written: October 2003

Abstract

Diminishing marginal utility is neither necessary nor sufficient for downward sloping demand, and it is not necessary for convex indifference curves. We illustrate these facts with two simple counter examples, using valid and easy to understand utility functions. The examples are accompanied with intuition, geometry, and basic mathematics of the utility functions, marginal utilities, marginal utility slopes, indifference curves, indifference curve slopes and curvatures, and ordinary demands and slopes. The wisdom of continuing to provide the conventional diminishing marginal utility rationale for downward sloping demand in principles textbooks is questioned.

JEL Classification: A22, D11

Suggested Citation

Beattie, Bruce R. and LaFrance, Jeffrey T., The Law of Demand Versus Diminishing Marginal Utility (October 2003). Available at SSRN: https://ssrn.com/abstract=468200

Bruce R. Beattie (Contact Author)

University of Arizona - Department of Agricultural and Resource Economics ( email )

1110 E. North Campus Drive
Tucson, AZ 85721-0023
United States

Jeffrey T. LaFrance

University of California, Berkeley ( email )

207 Giannini Hall / MC 3310
Berkeley, CA 94720
United States
510-643-5416 (Phone)
510-643-8911 (Fax)

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