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The Law of Demand Versus Diminishing Marginal Utility

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Author Info
Bruce Beattie (University of Arizona, Tucson)
Jeffrey LaFrance (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 diminishing marginal utility. The examples are accompanied with the geometry and basic mathematics of the utility functions and the implied ordinary/Marshallian demands.

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Paper provided by Department of Agricultural & Resource Economics, UC Berkeley in its series Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series with number 959.

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Date of creation: 01 Jun 2006
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Handle: RePEc:cdl:agrebk:959

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Keywords: Convex preferences; Diminishing marginal utility; Downward sloping;

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. LaFrance, Jeffrey T., 1985. "Linear demand functions in theory and practice," Journal of Economic Theory, Elsevier, vol. 37(1), pages 147-166, October. [Downloadable!] (restricted)
  2. Burt, Oscar R & Brewer, Durward, 1971. "Estimation of Net Social Benefits from Outdoor Recreation," Econometrica, Econometric Society, vol. 39(5), pages 813-27, September. [Downloadable!] (restricted)
  3. Cicchetti, Charles J & Fisher, Anthony C & Smith, V Kerry, 1976. "An Econometric Evaluation of a Generalized Consumer Surplus Measure: The Mineral King Controversy," Econometrica, Econometric Society, vol. 44(6), pages 1259-76, November. [Downloadable!] (restricted)
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(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Arjan Ruijs, 2009. "Welfare and Distribution Effects of Water Pricing Policies," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 43(2), pages 161-182, June. [Downloadable!] (restricted)
  2. Arjan Ruijs, 2007. "Welfare and Distribution Effects of Water Pricing Policies," Working Papers 2007.92, Fondazione Eni Enrico Mattei. [Downloadable!]
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