Question

State and explain the assumptions of the law of diminishing marginal utility.

State any two assumptions of the law of Diminishing Marginal Utility.

Write assumptions of the law of diminishing marginal utility.

State any four assumptions of Law of Diminshing Marginal Utility.

Examine the law of diminishing marginal utility giving its assumptions.

Mention any two assumptions of the law of diminishing marginal utility.

Answer 1

Statement of the Law: According to Prof. Alfred Marshall, “Other things remaining constant, the additional benefit which a person derives from a given increase in his stock of a thing diminishes with every increase in the stock that he already has.”

In other words, the marginal utility that any consumer derives from successive units of a particular commodity goes on diminishing as his or her total consumption of that commodity increases. In short, the more of a thing you have, the less you want to have more of it.

The following are the assumptions of the law of diminishing marginal utility:

1. Rationality: The consumer is assumed to be rational. It means his behavior is normal and that he tries to maximize his satisfaction.
2. Cardinal Measurement: The law assumes that utility can be cardinally or numerically measured. Hence, mathematical operations make it easy to know and compare the utility derived from each unit of a commodity.
3. Homogeneity: All units of commodities consumed are exactly homogeneous or identical in size, shape, colour, taste, etc.
4. Continuity: All units of a commodity are consumed in quick succession without any lapse of time.
5. Reasonability: All the units of a commodity consumed are of reasonable size. They are neither too big nor too small.
6. Constancy: All the related factors like income, tastes, habits, choices, and likes and dislikes of a consumer should remain constant. The marginal utility of money is also assumed to be constant.
7. Divisibility: The law assumes that the commodity consumed by the consumer is divisible so that it can be acquired in small quantities.
8. Single want: A commodity was given that can satisfy a single want of a person. The Law assumes the experience of a single want that is completely satiable at a given point in time.