Question

State whether true or false:

The law of diminishing marginal utility states that a rise in price of a product results in decline in its marginal utility.

Answer 1

This statement is false.

Reason:

• The law of diminishing marginal utility describes how marginal utility changes as consumption of a good increases.
• It does not describe the effect of a price rise.
• The correct fact is that marginal utility tends to fall as successive units of a commodity are consumed.