A Small Peek into Big B’s Car

Collections:
Does Law of Diminishing Marginal
Utility Hold Good?
Car Prices *(INR)
Rolls Royce 35,000,000
Phantom
Bentley 16,500,000
Continental GT
Mercedes S350 7,784,849
BMW 7 Series 7,360,000
Porsche Cayman 5,000,000
Range Rover 3,922,500
Mercedes E 3,793,399
Class
Lexus LX470 1,955,000
Ford Mondeo 1,492,000
Mercedes SL500 1,300,000
 CONCEPT OF MARGINAL UTILITY
The additional satisfaction or benefit (utility)
that a consumer derives from buying/Consuming
an additional unit of a product or service for a
given period of time .

Units Total Marginal 50

Utility Utility 40
30 Total Utility
1st Glass 20 20
2nd Glass 32 12
20
Marginal
3rd Glass 40 8
10 Utility
4th Glass 42 2
5th Glass 42 0 0
6th Glass 39 -3
1 2 3 4 5 6
-10
Law of Diminishing Marginal Utility
As a consumer consumes more and more units of a
specific commodity, the utility from the successive
units goes on diminishing

The Law is based on Three Facts :

o Total wants of a Consumers are unlimited but each
single want can be satisfied

o The marginal utility of money is constant given the

consumer’s wealth.

o Different goods are not perfect substitutes for each

other in the satisfaction of various particular wants
LUXURY GOODS AND MARGINAL UTILITY
o Acquire of more and more money
intends a person to acquire more
comfort and luxuries

o Want for branded goods like Gucci ,

Chanel , Rolex , Cartier , Versace ,
Prada ,Ray-Ban , Mulberry , Valentino
etc. which increases status , lifestyle
will never diminish.

o Likewise big b , Vijay Mallya is also

about cars and has more then 50
cars

o Neil Nitin Mukesh (Film Actor) love

for branded watches
o Mahendra Singh Dhoni is fascinated
about bikes. He has more then 22
bikes and want to purchase more
and more.

o Kareena Kapoor is fascinated about

handbags.

o All these purchase are differ in brands ,

characteristics , looks and are not made
in one go which intends buyer to
purchase more and more.
 ADDICTION

SMOKING:-
o How much cigarette does Shahrukh khan smoke daily?

o What happens to the marginal utility of an active smoker?

ALCOHOL AND DRUGS:-

o Loses the power of reasoning.

o Addition by one unit for them increases the utility.

GAMBLING:-
o Buying lottery tickets, entering football pools, and betting on
horse races.

o Whether a person loses or wins , his marginal utility will always

increase.
 PERSONAL HOBBY
In case of hobby like Stamp collection , Coin collection etc.
also this law cannot operate. For example the person who
has a hobby of collecting coins gets more satisfaction if one
more coin is added to his/her collection.
 Desire of Knowledge
Some experts say that man wants to get more and more
knowledge so the law cannot be applied in this case
Exceptions involving sportsmen and the fan
following in sports and sporting events.
SACHIN TENDULKAR
o Although most number of matches
played and most number of run scored
by him in the game. Still his hunger and
thirst for playing cricket has not
diminished but is on the rise

MICHAEL SCHUMACHER
o Famous for his eleven-year spell with
Ferrari and being Seven time world
champion , regarded as one of the
greatest F 1 Drivers of all times. He
retired from the sport in 2007, but
made a return in 2010 just for the
passion he has for racing.
ROGER FEDERER
o Federer has won a men's record 16 Grand Slam
singles titles In the days when he used to win in and out, his
fans never got tired of seeing him victorious

INDIAN PREMIER LEAGUE

o Even after a dose of over 40 days of cricket the
4th season of IPL managed to grab hold of about
19.7 million viewers for its inaugural game

FIFA WORLD CUP / ENGLISH PREMIER LEAGUE

o The FIFA World Cup has recorded a staggering growth in their TV
viewership with about 24.8 billion viewers in the year 1998 to 28.8
billion in 2002 with the 2010 world cup being the most watched event
in the history of sports Entertainment

o The English Premier League, which previously had loyal fans mostly in
Europe is itself attracting a huge amount of global fan following each
year and the fans never seem to get enough of it.
Technological advancement an exception
to the law
Mobile phone
o Increasing number of features has
increased marginal utility.

o Carsten Tews (Germany) has 1,563 different

mobile phones, which he has collected since
1998.
Computer software
o We started with DOS with almost no
features, still our utility was high

o Then followed the era of windows

operating systems

o The marginal utility is always increasing

 INCOME AND INVESTMENTS
INCOME
o The desire for earning never decreases . As income of
the individual increases the utility for earning more
and more income also increases.
MISERS:
The law does not hold true in case of persons like misers.
The miser gets increasing marginal utilities from additional
units of money, as the more money he has, the greater is
the desire to acquire more of it. Even here, it is difficult to
believe that the marginal utility of the thousandth rupee is
more than that of the first rupee.
INVESTMENT IN STOCK EXCHANGE
o There are many individuals who invest in
stock market in various Financial instruments
such as Shares, Bonds, Mutual Funds, etc., and
with a wide portfolio. Their utility of investing
never decreases but rather increases with
an objective of earning more profit.
INVESTMENT IN GOLD AND SILVER
o Gold and Silver is regarded as a store of value ,whereas
stocks are regarded as a return on value. It has been
used throughout history as money and has been a
relative standard for currency equivalents specific to
economic regions or countries. The prices of these
metals has increased since over the last few years
because individuals are purchasing more and investing
in these precious metals
THANK YOU