Describe the Law of diminishing Utility.

Expert Solution

Law of diminishing marginal utility states that as more and more standard units of a commodity are continuously consumed, marginal utility derived from every additional unit must decline. Intensity of desire for a commodity tends to decrease as more and more standard units of commodity are consumed at a point of time. (Marginal utility is the additional satisfaction derived when one more unit of a commodity is consumed).

For example if you keep consuming some cups of tea at a point of time then additional utility derived from each additional cup will decrease and a point will come when you will stop consuming it because of decreased marginal utility.

Two basic assumptions of law are-

i. Only standard units of the commodity are consumed. Like, a cup of tea, not a spoon of tea

ii. Consumption of the commodity is continuous. Not that one unit of the commodity is consumed now, and the other tomorrow.

Rahul Sunny answered 2 years ago

Explain the law of diminishing marginal utility & the law of diminishing return.

Explain the relationship between law of diminishing marginal utility and the law of demand.

A basic feature of the utility function (demand curve) is the law of diminishing marginal utility....

A basic feature of the utility function (demand curve) is the law of diminishing marginal utility. That is, as a person consumes an item or a product, the satisfaction or utility that they derive from the product wanes as they consume more and more of that product. In other words, the price a person is willing to pay (or the demand) for that product decreases with consumption. However, our demand for some environmental goods (e.g., clean air/water) does not wane...

What are the impacts of the law of diminishing marginal utility gained as it applies to...

What are the impacts of the law of diminishing marginal utility gained as it applies to a recent purchase of a good or service? Specifically, consider how your willingness-to-pay price was less for purchasing a second unit of a good or service based on getting less benefit from the second item you consume relative to the first? Would you respond to purchasing the second unit if it was sold at a discounted price? Do you seek to gain the same...

Explain the law of diminishing marginal utility and illustrate with marijuana? Examples

Define the Law of Diminishing Marginal Utility and provide examples to explain it.

What is the utility maximization rule? What role does the law a diminishing marginal utility play in utility maximization?

Explain the concept of utility maximization. What is the utility maximization rule? What role does the law a diminishing marginal utility play in utility maximization?

What is the relationship and significance of the Law of Diminishing Marginal Utility and consumer decision...

What is the relationship and significance of the Law of Diminishing Marginal Utility and consumer decision making?

How does the law of diminishing marginal utility fit into an analysis of the demand for...

How does the law of diminishing marginal utility fit into an analysis of the demand for health care? Give some examples of decisions concerning health care where you personally are indifferent between getting medical care or doing without medical care.

Explain the three characteristics of demand curve and the law of diminishing marginal utility. Illustrate with...

Explain the three characteristics of demand curve and the law of diminishing marginal utility. Illustrate with a demand graph.

Question