Question

Describe the law of diminishing marginal utility. State its assumption and exceptions.

Answer 1

The idea of falling marginal value is among the most crucial economic concepts.

The law serves as a representation of the general pattern of human behavior.

According to the legislation, as a consumer consumes more of a good, the MU obtained from each extra unit of that commodity falls while keeping a constant level of consumption of other goods.

In other words, utility contributions decrease with time as more and more commodities are consumed in larger and larger quantities.

The fundamental assumptions of the rule of diminishing marginal utility are as follows:

i. Consistency in Consumer Preference

ii. Standard Unit

iii. consumption consistency

iv. reasonableness

The following are some exceptions on the Law of Diminishing Marginal Utility:

i.  Hobbies

ii. Misers