The Main Limitations of the law of Equi-marginal Utility are mentioned below:
(1) Measurability of utility:
The law presupposes that the marginal utility of commodity can be measured by a consumer but utility is a subjective concept. There is no objective unit to measure it which differs from man to man and for the same consumer it differs from commodity to commodity.
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(2) Irrationality by the consumer or ignorance of the consumer:
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For application of this law the consumer has to calculate the marginal utilities of different commodities he wants to purchase and compare them. It is easier said than done. In real life the consumer does not behave so rationally.
The mind of the consumer is neither a calculating machine nor a computer while making purchase. Because of his ignorance he cannot make a rational calculation of marginal utilities of different commodities.
(3) Slave of customs and habits:
When a consumer purchases he becomes the victim of custom, habit and advertisement and is least concern about maximum satisfaction.
(4) Indivisible commodities:
In case of indivisible commodities the law is not applicable. The marginal utility of house cannot be compared with that of marginal utility of food.
(5) Not applicable to free goods:
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In case of free goods one does not pay for these goods. Therefore, law is not applicable.
(6) Changes in prices:
If the prices of goods frequently change, the observance of the law may be difficult. This would complicate the process of comparing the marginal utilities of various goods.
(7) Marginal Utility of money does not remain constant:
The assumption of constant marginal utility of money is quite unrealistic and it has been severely criticised by Prof. Manmohan Singh.