Question

Which of the following is not the assumption of law of diminishing utility?



1.Consumtion is continuous

2.other things remains constant

3.consumer is rational

4.none

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Answer 1

Answer:

Substitution of goods is not an assumption under law of DMU, because if one good substitutes for another then law of DMU will not remain applicable.

Explanation:

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Answer 2

Answer: option 4

Explanation:

1. Consumption is continuous

                  It is assumed that consumption is continuous  and there will be no time gap/ intervals between consumption of one unit to another.

2. Other things remains constant

                   Other things like marginal utility of money is assumed to be constant.

3. consumer is rational

                   consumer is assumed to be rational as his decision-making process that is based on making choices that will result in an optimal level of benefit or utility.

First three options are the assumptions of law of diminishing utility.

So, answer is option 4