Question

5. Answer in detail:
State and explain the law of diminishing
marginal utility with exceptions.
class 12th​

Answer 1

Answer:

The law of diminishing marginal utility states that as more and more of goods are consumed, the utility derived from them falls. However, there is an exception to this law. It is observed that a consumer sometimes gain more utility as more and more of a good is consumed.

These exceptions are discussed as follows:

i. Hobbies:

Implies that the law of diminishing marginal utility is violated in case of hobbies of an individual, such as stamp collection and coin collection. This is because an individual derives more and more utility from additional unit gained from a hobby item. For instance, a level of satisfaction increases when a new variety of stamps or coins are received. However, the utility diminishes if the same variety of stamps or coins is gained every time.

ii. Misers:

Implies that the law of diminishing marginal utility cannot be applied to misers. This is because they derive more and more utility from more and more of any good.

Utility is a feeling of satisfaction, pleasure, or happiness. The demand of a good depends on the amount of utility derived by a consumer from that good. Therefore, it is necessary to measure utility to determine the demand of goods or services.