The following points highlight the eleven major limitations of the law of equi-marginal utility.
Some of the criticisms are: 1. Ignorance of the Consumer 2. Indivisibility of Commodities 3. Durability of the Goods 4. Effect of Customs and Fashions 5. Fixed Proportion of Consumption 6. Control or Rationing of Consumption Goods and Others.
Equi-Marginal Utility Criticism # 1. Ignorance of the Consumer:
Ignorance of the consumer may prevent him from making a rational use of money.
His satisfaction may not be the maximum because the marginal utilities from his expenditure cannot be equalised due to ignorance.
ADVERTISEMENTS:
Therefore, on account of his ignorance the consumer may not know where the utility is greater and where it is less.
Equi-Marginal Utility Criticism # 2. Indivisibility of Commodities:
Prof. Boulding has said that for the operation of this law the goods must be of divisible nature but people in their normal life consume such commodities which are of indivisible nature, therefore, this rule may not apply. For example—Use of Radio, Watch, Motor Car etc.
Equi-Marginal Utility Criticism # 3. Durability of the Goods:
Consumption of some goods is for long period where it becomes difficult to find. Out its marginal utility. For example— Use of Refrigerator, Motor Cycle etc.
Equi-Marginal Utility Criticism # 4. Effect of Customs and Fashions:
Sometimes a consumer may be in the strong clutches of custom or is a slave of modern fashion. In that case, he will not be able to derive maximum satisfaction out of his expenditure, because he cannot give up the consumption of such commodities.
Equi-Marginal Utility Criticism # 5. Fixed Proportion of Consumption:
ADVERTISEMENTS:
Again, there are certain goods whose consumption is fixed portion is possible. It cannot be either increased or decreased. For example—Consumption of milk, tea, bread or butter etc. Consumer can use these commodities only up to proper quantity. Hence, this law cannot be active or can operate actively.
Equi-Marginal Utility Criticism # 6. Control or Rationing of Consumption Goods:
Sometimes, government puts rationing or control over the consumption of certain commodities, then in that case the desire of the consumer is to use more goods but he cannot use it due to control or rationing.
Equi-Marginal Utility Criticism # 7. Frequent Changes in the Price of the Commodity:
Frequent changes in the prices of different goods render the enforcement of the law very difficult. The consumer may not be able to make the necessary adjustments in his expenditure in a constantly changing price situation.
Equi-Marginal Utility Criticism # 8. Consumer’s Indefinite Budget Period:
Majority of the consumer do not prepare their family budget they on meeting expense as per their requirements. In such cases it becomes difficult to know the activeness or the use of Equimarginal Utility.
Equi-Marginal Utility Criticism # 9. When the Resources are Unlimited:
ADVERTISEMENTS:
The law has obviously no place where the resources are unlimited. For example—In the case of the free gift of nature. In such cases, there is no need of diverting expenditure from one direction to another.
Equi-Marginal Utility Criticism # 10. Incompetent Organizer of Business:
It has been seen that an incompetent organizer of business will fail to achieve the best results from the units of land, labour and capital that he employs. This is because he may not be able to divert expenditure to more profitable channels from the less profitable ones.
Equi-Marginal Utility Criticism # 11. Economists are of this Opinion that Consumers are not so Rational as this Law Considers:
Economists have said that man is a rational being but he is not as rational as under this law it has been presumed. He cannot analyse or can make difference the amount of utility which he is going to derive.
In this connection, Prof. Chapman has said—”We are of course, not compelled to distribute our income according to the Law of Substitution or Equimarginal expenditure as a stone thrown in the air is compelled, in a sense to fall back to the earth but as a matter of fact, we do so in a certain rough fashion because we are rational.”