Gossen's Second Law, named for Hermann Heinrich Gossen (1810–1858), asserts that an economic agent will allocate their expenditures so that the ratio of the marginal utility of each good or service to its price (the marginal expenditure necessary for its acquisition) is equal to that for every other good or service. Formally,
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👉 Gossen's second law in the context of Gossen's laws
Gossen's laws are three laws of economics that were articulated by Hermann Heinrich Gossen (1810–1858):
- Gossen's First Law is the law of diminishing marginal utility: that marginal utilities are diminishing across the ranges relevant to decision-making.
- 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 goods and services.
- Gossen's Third Law is that scarcity is a precondition for economic value.