Question

The law of diminishing marginal utility is a fundamental and universal law. How ​

Answer 1

Answer:

Law of Diminishing Marginal Utility (DMU) states that as we consume more and more units of a commodity, the utility derived from each successive unit goes on decreasing.

People spend their income on various goods because consuming more and more of any one good reduces the marginal satisfaction obtained from further consumption of the same good.

Law of DMU has universal applicability and applies to all goods and services.

Assumptions of DMU:

Cardinal measurement of utility: it is assumed that utility can be measured and it can be expressed in numerical terms as 1, 2, 3, etc.

Monetary measurement of utility: it is assumed that utility can be measured in monetary terms.

Continuous consumption: it is assumed that consumption is a continuous process. For example, if one ice-cream is consumed in the morning and another in the evening, then second ice-cream may provide equal or higher satisfaction.

No change in quality: quality is assumed as uniform and constant.

Fixed income and prices: it is assumed that income of the consumer and prices of the goods are assumed to be constant.

Explanation:

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