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'''Gossen's laws''', named for [[Hermann Heinrich Gossen]] (1810 – 1858), are three ostensible laws of economics:
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* '''Gossen's First Law''' is the [[Law of diminishing marginal utility|“law” of diminishing marginal utility]]: that [[marginal utility|marginal utilities]] are diminishing across the ranges relevant to decision-making.
* '''[[Gossen's second law|Gossen's Second Law]]''', which presumes that [[utility]] is at least weakly quantified, is that in equilibrium an agent will allocate expenditures so that the ratio of marginal utility to price (marginal cost of acquisition) is equal across all [[Good (economics)|goods]] and [[Service (economics)|services]].
:<math>\frac{\partial U/\partial x_i}{p_i}=\frac{\partial U/\partial x_j}{p_j}\,\forall\left(i,j\right)</math>
:where
:* <math>U</math> is utility
:* <math>x_i</math> is quantity of the <math>i</math>-th good or service
:* <math>p_i</math> is the price of the <math>i</math>-th good or service
* '''Gossen's Third Law''' is that [[scarcity]] is a precondition for economic value.
 
== See also ==
* [[Marginalism]]
 
== References ==
* Gossen, Hermann Heinrich; ''Die Entwicklung der Gesetze des menschlichen Verkehrs und der daraus fließenden Regeln für menschliches Handeln'' (1854). Translated into English as ''The Laws of Human Relations and the Rules of Human Action Derived Therefrom'' (1983) MIT Press, ISBN 0-262-07090-1.
 
{{DEFAULTSORT:GoSSen'S lawS}}
[[Category:Marginal concepts]]
[[Category:Consumer theory]]
[[Category:Utility]]
 
{{economics-stub}}

Latest revision as of 21:32, 31 October 2014

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