Question

According to Marshall, The law of diminishing marginal utility
(a) Applies on money in the manner in which it applies on commodity
(b) Do not applies on money except bank money
(c) Does not applies on bank money but applies on cash
(d) Applies on all commodities except money​

Answer 1

Answer:

option a:According to Alfred Marshall, ' The Law of Diminishing Marginal Utility is defined as the additional utility which a person derives from an increase of his stock of a commodity

✯ADDITIONAL INFORMATION

◉What Is Diminishing Marginal Utility?

The Law Of Diminishing Marginal Utility states that all else equal as consumption increases the marginal utility derived from each additional unit declines. Marginal utility is derived as the change in utility as an additional unit is consumed. Utility is an economic term used to represent satisfaction or happiness. Marginal utility is the incremental increase in utility that results from consumption of one additional unit.

◉Understanding the Law

Marginal utility may decrease into negative utility, as it may become entirely unfavorable to consume another unit of any product. Therefore, the first unit of consumption for any product is typically highest, with every unit of consumption to follow holding less and less utility. Consumers handle the law of diminishing marginal utility by consuming numerous quantities of numerous goods.

◉Diminishing Prices

The Law of Diminishing Marginal Utility directly relates to the concept of diminishing prices. As the utility of a product decreases as its consumption increases, consumers are willing to pay smaller dollar amounts for more of the product. For example, assume an individual pays $100 for a vacuum cleaner. Because he has little value for a second vacuum cleaner, the same individual is willing to pay only $20 for a second vacuum cleaner. The law of diminishing marginal utility directly impacts a company’s pricing because the price charged for an item must correspond to the consumer’s marginal utility and willingness to consume or utilize the good.

◉Example of Diminishing Utility

An individual can purchase a slice of pizza for $2; she is quite hungry and decides to buy five slices of pizza. After doing so, the individual consumes the first slice of pizza and gains a certain positive utility from eating the food. Because the individual was hungry and this is the first food she consumed, the first slice of pizza has a high benefit. Upon consuming the second slice of pizza, the individual’s appetite is becoming satisfied. She wasn't as hungry as before, so the second slice of pizza had a smaller benefit and enjoyment as the first. The third slice, as before, holds even less utility as the individual is now not hungry anymore.

Answer 2

The correct answer is OPTION D:  Applies to all commodities except money​

• The law of declining marginal utility asserts that as more commodities are obtained, their value decreases.
• During the course of consumption, as more and more units of a commodity are used, every succeeding unit gives utility at a falling rate, given other factors remain the same; yet, the total utility grows, wrote British economist Alfred Marshall.
• Because it is closely tied to the demand rule, the law of diminishing marginal utility is relevant to the business.
• This law states that as prices fall, consumption increases, and as prices rise, consumption decreases.
• Using the opposite logic, we could conclude that as a commodity gets more widely available, the value of a single unit falls, reverting to the law of falling marginal utility.