{"id":7535,"date":"2021-10-09T18:59:53","date_gmt":"2021-10-09T13:29:53","guid":{"rendered":"https:\/\/scholarsclasses.com\/blog\/?p=7535"},"modified":"2025-10-08T16:55:35","modified_gmt":"2025-10-08T11:25:35","slug":"relationship-between-marginal-utility-and-price","status":"publish","type":"post","link":"https:\/\/scholarsclasses.com\/blog\/relationship-between-marginal-utility-and-price\/","title":{"rendered":"Relationship between Marginal Utility and Price | Economics Blogs"},"content":{"rendered":"\n

Relationship between Marginal Utility and Price<\/h2>\n\n\n\n
\"Relationship
Relationship between Marginal Utility and Price<\/figcaption><\/figure>\n\n\n\n

The relationship between marginal utility and price in order to understand how the law of diminishing marginal utility forms the basis of law of demand. It is a perfect example of practical application of the law of
Diminishing Marginal Utility (DMU). To understand the relation, it is essential to convert marginal utility in terms of money so that it can be compared with market price. <\/p>\n\n\n\n

Assume:
<\/strong>One unit of marginal utility = Rs 20
Market price per unit of Commodity (Y) = Rs 100.<\/p>\n\n\n\n

The below table explains the relationship between marginal utility and price.<\/p>\n\n\n\n

No of Units<\/strong><\/td>MU<\/a> per unit <\/strong>
of Y<\/strong><\/td>		MU in terms <\/strong>
of money
1 unit = Rs 20<\/strong><\/td>		Market <\/strong>
price\/unit
of Y = Rs 100<\/strong><\/td>		Comparison
between MU
and price<\/strong><\/td><\/tr>
1<\/td>10<\/td>200<\/td>100<\/td>200 MU>Rs 100<\/td><\/tr>
2<\/td>8<\/td>160<\/td>100<\/td>160 MU>Rs 100<\/td><\/tr>
3<\/td>7<\/td>140<\/td>100<\/td>140 MU>Rs 100<\/td><\/tr>
4<\/td>5<\/td>100<\/td>100<\/td>100 MU=Rs 100<\/td><\/tr>
5<\/td>3<\/td>60<\/td>100<\/td>60 MU<Rs 100<\/td><\/tr>
6<\/td>1<\/td>20<\/td>100<\/td>20 MU<Rs 100<\/td><\/tr><\/tbody><\/table>
Relationship between Marginal Utility and Price<\/strong><\/figcaption><\/figure>\n\n\n\n