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The law of demand versus diminishing marginal utility

  • Beattie, Bruce R.
  • LaFrance, Jeffrey T

    (University of California, Berkeley. Dept of agricultural and resource economics and policy)

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. Copyright 2006, Oxford University Press.

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Paper provided by University of California at Berkeley, Department of Agricultural and Resource Economics and Policy in its series CUDARE Working Paper Series with number 0959.

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Length: 19 pages
Date of creation: 2005
Date of revision:
Handle: RePEc:are:cudare:0959
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  1. LaFrance, Jeffrey T., 1985. "Linear demand functions in theory and practice," Journal of Economic Theory, Elsevier, vol. 37(1), pages 147-166, October.
  2. Jeffrey T. LaFrance & Harry D. Gorter, 1985. "Regulation in a Dynamic Market: The U.S. Dairy Industry," Monash Economics Working Papers archive-34, Monash University, Department of Economics.
  3. Hausman, Jerry A, 1981. "Exact Consumer's Surplus and Deadweight Loss," American Economic Review, American Economic Association, vol. 71(4), pages 662-76, September.
  4. 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.
  5. Burt, Oscar R & Brewer, Durward, 1971. "Estimation of Net Social Benefits from Outdoor Recreation," Econometrica, Econometric Society, vol. 39(5), pages 813-27, September.
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