In actual life, we come across many situations, where the law of equi-marginal utility is not applicable. Some of the important limitations are:
(i) It is assumed that the consumer spends very small amount of money on different commodities. However, this is not possible as commodities, especially costly ones, are indivisible. Radios, TV, telephone, etc., are such commodities, which cannot be bought in parts. Their purchases are bulky and do not allow small variation. In such cases, it becomes difficult to equate marginal utilities.
(ii) Most of the consumers are ignorant. They do not know about the various alternatives which are most useful. Consumers are not prudent enough to assess and compare variations in marginal utilities of different commodities.
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(iii) The law assumes that utility can be measured. But, it is a subjective mental phenomenon, which cannot be measured or compared on a cardinal scale. Further, constancy of marginal utility of money is open to question.
(iv) The law assumes that the fashion, tastes, habits, customs and income of people remain constant. But, in real life these things, seldom remain constant. Moreover, many people are bound by customs, traditions and fashions, which also change over time. Hence, consumers often spend irrationally on relatively less useful goods or goods yielding low utilities.
(v) There is problem associated with the durable goods, which are used over a long period of time. Expenditure on such goods is increased during one period, but utility derived from it is spread over many time periods. It becomes difficult for a consumer to equate the MU of services rendered by such commodities in each period.
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(vi) In real life, consumer hardly tries to compare marginal utilities of different commodities, when the amount of expenditure involved is very small. The law is, thus, ignored by the consumer in his behaviour pattern and he often buys relatively inessential goods.
(vii) The law is not applicable in the case of complementary goods, which cannot be substituted for each other.
In spite of the limitations described above, the law does not lose its fundamental validity.
