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 1 year ago

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