Limitations of marginal utility theory refer to the weaknesses and unrealistic assumptions within the utility maximisation model, which often fails to accurately explain real-world consumer behaviour.

Key Limitations:

• Assumes rational behaviour: It assumes consumers carefully calculate the value of every purchase, whereas many real-life purchases are impulsive or driven by habit.
• Assumes perfect information: It assumes consumers have full knowledge of all goods and prices, but in reality, consumers rarely have complete information.
• Ignores time and complexity: The theory does not account for how personal preferences change over time or how difficult it is to apply to infrequent purchases.
• Treats all money as equal: It assumes the value of money is the same for everyone, despite the fact that the marginal utility of money differs greatly between rich and poor individuals.
• Ignores social and cultural factors: It overlooks factors like social status, fashion trends, and norms, which often lead people to buy things for reasons other than simple utility.
• Difficult to measure utility: Utils are hypothetical units that cannot be measured or compared between different people, making the theory hard to test or prove.
• Assumes goods are divisible: It assumes goods can be bought in any small amount, ignoring that many items like cars or houses are indivisible.