Which one of the following statements is most suitable to the law of diminishing marginal utility?
Answer & explanation
Correct answer: option 2
The correct answer is Option (2) → Marginal utility (MU) becomes zero at a level when total utility (TU) is maximum and remains constant.
Total utility (TU) is the whole satisfaction a consumer gets from the units of a good consumed; marginal utility (MU) is the change in total utility from one more unit. The first glass of water gives a thirsty person great satisfaction, the second a little less, and so on: MU falls as more is consumed. This is the law of diminishing marginal utility, and it decides how TU behaves:
While MU is positive, each unit adds something, so TU rises, but more and more slowly.
When an extra unit adds nothing, MU is zero and TU is at its maximum.
Beyond that point extra units reduce satisfaction: MU becomes negative and TU falls.
Why the other options are incorrect
Option (1) MU remains more than zero at all consumption levels. — Incorrect. MU keeps falling, reaches zero when TU is at its maximum, and then turns negative.
Option (3) The marginal utility increases with increase in consumption of the commodity. — Incorrect. This is the reverse of the law: each additional unit gives less satisfaction than the one before it.
Option (4) Marginal utility falls but remains positive at all consumption levels. — Incorrect. The first half is the law, but MU does not stay positive: it falls to zero and below.
NCERT (2025-26): “Law of Diminishing Marginal Utility states that marginal utility from consuming each additional unit of a commodity declines as its consumption increases, while keeping consumption of other commodities constant. MU becomes zero at a level when TU remains constant. In the example, TU does not change at 5th unit of consumption and therefore MU5 = 0. Thereafter, TU starts falling and MU becomes negative.” |