There are various exception/limitation of the law of diminishing marginal utility which are as follows:
1. Homogeneous units:
There should be a single commodity with homogeneous units wanted by an individual consumer. All units of the commodity should be of the same weight, quality, size, taste, etc.
2. No change in taste, habit, customs, fashion, and income of the consumer:
There should be no change in the tastes, habits, customs, fashions and income of the consumer. A change in any one of them may increase marginal utility rather than diminishing.
There should be continuity in the consumption of the commodity. Units of the commodity should be consumed in succession at one particular time.
4. Suitable size of units:
Units of the commodity should be of a suitable size. For example, giving water to a thirsty person by spoons will increase the utility of the successive spoons of water.
5. Ordinary commodities:
Goods should be of an ordinary type. If they are commodities, like diamonds and jewels, or hobby goods like stamps, coins or paintings, the law does not apply. The utility of the additional coins or jewels may be greater than the earlier pieces. But this view is not correct. For the law also applies in their case. The collector of coins or jewels will never like to have innumerable pieces of the same coin or jewels.
6. Marginal utility of money is not constant:
Our intensity for money increases as we have more of it. No doubt, the marginal utility of money does not become zero, but it definitely falls as a person gets more and more money. The marginal utility of money for a rich is less while it is high for a poor man.
The consumer should be an economic man, who acts rationally. This law does not apply to persons of special nature such as drunkard, druggist etc. Marginal utility of wine for drunkard increases with every peg of drinks. But this is not wholly true. In the beginning the marginal utility of each peg rises but ultimately it starts falling and even become negative when a drunkard starts vomiting.