Question

Explain with reasons, whether you agree or disagree with the following statement

The law of 'diminishing marginal utility' is important in practice.

Answer 1

Yes, we agree with the given statement. The law of diminishing marginal utility is important in practice. The following are some of the points that highlight the importance of the law. 

1. This law helps the consumers in budget planning such that maximum satisfaction is achieved.
2. It helps the producers in determining various policies such as the price and sales policies.
3. Keeping in consideration this law, a monopolist can easily follow the price discrimination policy.
4. With the help of this law, the formulation and implementation of appropriate policy decisions can be taken.
5. The law also helps the finance minister in formulating progressive taxation policies so as to reduce economic inequality.