Question

State the following statement is True or False:

The law of diminishing marginal utility explains economic behaviour of a rational consumer.

Options

• True

• False

Answer 1

The law of diminishing marginal utility explains economic behaviour of a rational consumer. -True

Explanation: The law of diminishing marginal utility states that: “As a consumer consumes more and more units of a commodity at succession, the marginal utility derived from the consumption of each additional unit of the commodity falls.” Such a behaviour is a rational behaviour. As the consumer has more of a commodity, the intensity of want for additional units goes on decreasing, i.e. utility decreases. No rational consumer would want additional units of the commodity when the intensity of want is decreasing.