Equi Marginal Principle
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Equi-Marginal Principle
This principle state that for a consumer to maximize utility they have to allocate limited income of the business goods and services so that the marginal utilities per capital of the expenditure on the final unit of each good purchased will be equal.
Limitations of Equi-Marginal Principle
- The consumers do not have time to work out marginal utility: The equal-marginal principle gives the customers freedom to acquire goods and service out of individual interest. This freedom has enabled consumers to purchase goods and services in the market due to their preference thus making it difficult for them to work out marginal utility whose failure leads to over consumption particular of goods and services in the market.
- There are numerous goods in the market: The income of consumers usually varies depending on their occupation and their pay on a periodic basis. The common similarity that consumers have basic income gives the market access, and the problems arise due to many goods found in the market whose acquisition is limited by the income. The fluctuations in the income of consumers and the innumerable goods in the market for the customers to choose from has made the access to some items in the market out of lack of affordability.
- It 's hard to evaluate utility: Consumers always acquire goods and services in the market as a result of need but not the value of service the product will generate. The majority of consumers have no idea of the item utility value and acquire goods due to interest and need which in the long-term affects the overall utility value in the market because the consumers cannot define the cardinal value of utility which affects business operation and the state of the market.