The law of DMU has universal applicability so it is an important law in economics.
Importance or significance of the law of DMU is as follows :
(1) Useful to Consumers : The law is important to the consumer because it helps the consumer to maximize his satisfaction. It creates awareness among the consumers 5 to get maximum satisfaction with limited resources.
(2) Useful to the Government : The law ; guides the government in framing various economics policies like progressive tax policy, pricing policy, trade policy, import export policy, etc. so as to maximise economic welfare of the society.
(3) To understand Paradox of Value : The law of DMU helps us to understand paradox of values, i.e. value-in-use and value-inexchange.
Some goods have more value-in-use but less value-in-exchange like air, water, sunlight, etc. while some goods have less value-in-use but high value-in-exchange like gold, diamond, etc. Greater value-in-use denotes high total utility whereas, more value in exchange denotes higher marginal utility.
(4) Basis of Law of Demand : The law of demand is based on the law of DMU. A consumer compares MU with price of a commodity. He purchases till MU equals price. When a consumer buys more and more units of a commodity, his MU diminishes. It means, a consumer would buy more only at a lower price which is a basis of law of demand.
