Question

State with reasons whether you agree or disagree with the following statement.

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

Options

• 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 a collection of various stamps and coins, rare paintings, music, reading, etc., the law does not hold true 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: In the case of a miser, every additional rupee gives him more and more satisfaction. The marginal utility of money tends to increase with an increase in the stock of money. However, this situation ignores the assumption of rationality.

3) Addictions: When his money stock grows, his MU of money also tends to grow.

4) Power: This is an exception to the law because when a person acquires power, his lust for power increases. He desires to have more and more of it. However, this again violates the rationality assumption.

5) Money: 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 that is used to satisfy various wants. However, according to some economists, this law is applicable to money too. For example, the marginal utility of money is more to a poor person than to a rich person.