The law of demand versus diminishing marginal utility
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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- Jeffrey T. LaFrance & Harry de Gorter, 1985.
"Regulation in a Dynamic Market: The U.S. Dairy Industry,"
American Journal of Agricultural Economics,
Agricultural and Applied Economics Association, vol. 67(4), pages 821-832.
- 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.
- Burt, Oscar R & Brewer, Durward, 1971. "Estimation of Net Social Benefits from Outdoor Recreation," Econometrica, Econometric Society, vol. 39(5), pages 813-27, September.
- Hausman, Jerry A, 1981. "Exact Consumer's Surplus and Deadweight Loss," American Economic Review, American Economic Association, vol. 71(4), pages 662-76, September.
- LaFrance, Jeffrey T., 1985. "Linear demand functions in theory and practice," Journal of Economic Theory, Elsevier, vol. 37(1), pages 147-166, October.
- 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.
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