Economics • Economic BasicsEasy
Which of the following best defines 'Law of Diminishing Marginal Utility'?
A. Total utility decreases as more units of a good are consumed
B. As consumption of a commodity increases, the marginal utility derived from each successive unit goes on declining✓ Correct Answer
C. Marginal utility remains constant regardless of consumption levels
D. Price of a commodity always falls as demand increases
💡 Solution & Explanation
The Law of Diminishing Marginal Utility states that as consumption of a specific good increases within a given time frame, the incremental satisfaction derived from each additional unit progressively declines. Total utility may still increase as long as marginal utility remains positive, refuting the notion that overall satisfaction invariably drops. A standard related exam principle is that consumer equilibrium is attained when the marginal utility per rupee spent on all consumed commodities is equalized.
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