Question

State with reason whether you agree or disagree with the following statement:

There are no exceptions to the law of diminishing marginal utility.

विकल्प

• Agree

• Disagree

Answer 1

I disagree with the given statement.

Reason:

Following are the exceptions to the law of diminishing marginal utility :

1. Hobbies: In certain hobbies like collection of various stamps and coins, rare paintings, music, reading, etc., the law does not hold because every additional increase in the stock gives more pleasure. This increases marginal utility. However, this violates the assumption of homogeneity and continuity.
2. Miser: MU of money increases for a miser as his stock of money keeps on increasing. However, the assumption of rationality is violated in this case.
3. Addiction: MU of alcohol keeps increasing for a drunkard as he consumes more of it. However, in the case of all people with an addiction, the assumption of rationality is violated.
4. Power: The MU of power keeps increasing as the person gets more power. However, this again violates the rationality assumption.
5. Money: MU of money keeps increasing as the stock of money increases. It is said that the MU of money never becomes zero. It increases when the stock of money increases. This is because money is a medium of exchange to satisfy various wants. For example, the marginal utility of money is more to a poor than a rich person.