Law of diminishing marginal utility is nothing, it states a simple phenomenon which is a consumer when he/she keeps on consuming particular product say apple the utility of the product goes on diminishing. How many apples you and I can eat. If we are hungry, we can eat three apples and satisfy our hunger.If we eat more than three we don’t say we are hungry we are just eating to make our stomach full with food. After a certain point of time, we are no longer able to consume food. This principle known to the world as Law of diminishing marginal utility.
The law has three basic facts
- All wants of man/woman cannot be satisfied but a single want or set of wants can be very well satisfied.
- Different products are not preferable. They are not perfectly substitutable for the existing product.
- Given the consumer’s wealth, marginal utility of money of the consumer is constant that is it remains the same.
Seriously speaking how all wants of a consumer can be satisfied. If a product, a consumer is searching for is available only in a foreign country, it delays the arrival of the product even more. After the arrival of product, the consumer may feel it doesn’t satisfy his want or satisfied with a want but doesn’t require it anymore.
Another thing is if a consumer uses a particular product for a long time, he is not willing to change his mind when a new and innovative and product with best feature arrives. It may also be true the product in question may not suit the needs of the buyer. So he/she will rarely test the waters.
A consumer buys what she/he wants. Though he may be interested in buying unwanted things to the household, she/he will always try to manage his or her money. The consumer is protective about his money, so he or she will try to make a habit of budget making. This case is an exception in few cases only.
Consumers are the kings, not the companies. All industries whether small or big must produce goods or import or export goods according to the tastes and preferences of the consumer. If they do not, they are at a heavy loss. These days fashionable products sale more than unfashionable products. Companies must give the opportunity solely to its employees to create an innovative idea of producing goods or services.
All wants of human cannot be satisfied by a single company. They should keep this in mind, and sell goods even if it means the sale is not up to the mark.
Consumers become loyal customers when they are attracted to the services of the concern. If they don’t they will never think twice visiting the concern again.
That’s why a concern has the responsibility to make their first impression, the best impression otherwise, consumers will go to their enemy company. Consumers have so many choices to choose from while the company whether multinational or national or petty shops directly depends on the consumers for everything especially their want of money for a living.The impact of consumers on companies is very strong.