Question

State and explain the law of Diminishing Marginal Utility. Explain its assumptions.

Answer 1

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Answer 2

Explanation:

The Law of Diminishing Marginal Utility states that everything else equal as consumption improves the marginal utility obtained from each decline in each of the extra unit. As an extra unit is consumed, the marginal utility is obtained as a shift in utility. Utility is an economic term that depicts the happiness or fulfillment.

The assumptions of the law are -

• To consume every unit of goods, the consumer consuming the goods should be logical and knowledgeable.
• The products to be consumed should be of the same size and shape.
• Without time gap, consumers should eat the products.
• The income, preference, taste and fashion of the consumer should not be changed while the goods are being consumed.