Question

Please anyone answer correctly of this question !​

Answer 1

Answer:

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.

Explanation:

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.

Example:

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.

In fact, the fourth slice of pizza has experienced a diminished marginal utility as well, as it is difficult to be consumed because the individual experiences discomfort upon being full from food. Finally, the fifth slice of pizza cannot even be consumed. The individual is so full from the first four slices that consuming the last slice of pizza results in negative utility. The five slices of pizza demonstrate the decreasing utility that is experienced upon the consumption of any good. In a business application, a company may benefit from having three accountants on its staff. However, if there is no need for another accountant, hiring a fourth accountant results in a diminished utility, as little benefit is gained from the new hire.

Uses:

1)To determine the value or price of a commodity.

2)The law of diminishing marginal utility is useful for individuals to determine how much money should be spent on a particular commodity.

Answer 2

Explain the law of diminishing marginal utility with the help of numerical example. Indicate two uses of the law.

Law of diminishing marginal utility states that marginal utility first of all increases. Than we sèe gradual decrease in it and afterward it goes in negative. The law of diminishing marginal utility has certain assumptions,such as, this law is valid only in case of rational user, the price is constant, the quality and quantity is also constant. Also, there is continuous consumption of commodity.

Numerical example:-

$\begin{gathered}\left|\begin{array}{c | c | c}\sf \ Consumption \: of \: good \: X\ & \sf \: MU_x \\\sf \ 1\ & \sf 20 \\\sf \ 2 \ & \sf 10 \\\sf \ 3 \ & \sf 0 \\\sf \ 4 \ & \sf - 10 & \sf \\\sf \ 5 \ & \sf - 20 & \\\end{array}\right|\end{gathered}$

The uses of Marginal utility is to basically measure the utility provided by each commodity that we consume to satisfy our wants.

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