Choose the correct statements in the context of the law of diminishing marginal utility
(A) States that each successive unit of a commodity provides lower marginal utility.
(B) States that each successive unit of a commodity provides higher marginal utility.
(C) Explains why demand curves have a negative slope.
(D) States that the marginal utility from consuming each additional unit of a commodity declines as its consumption increases, while keeping consumption of other commodities constant.
Choose the correct answer from the options given below:
Answer & explanation
Correct answer: option 4
The correct answer is Option (4) → (A), (C) and (D) only
Marginal utility is the change in total satisfaction from consuming one more unit of a good.
(A) States that each successive unit of a commodity provides lower marginal utility. — Correct. This is the law itself: each extra unit adds less satisfaction than the one before.
(B) States that each successive unit of a commodity provides higher marginal utility. — Incorrect. The law says marginal utility falls as consumption rises, so this statement has it the wrong way round.
(C) Explains why demand curves have a negative slope. — Correct. Each extra unit is worth less to the consumer, so she buys it only at a lower price. So a larger quantity goes with a lower price, and the demand curve slopes down.
(D) States that the marginal utility from consuming each additional unit of a commodity declines as its consumption increases, while keeping consumption of other commodities constant. — Correct. This is the full statement of the law. It adds the condition that consumption of other goods does not change.
NCERT (2026-27): “…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.… …An explaination for a downward sloping demand curve rests on the notion of diminishing marginal utility. The law of diminishing marginal utility states that each successive unit of a commodity provides lower marginal utility. Therefore the individual will not be willing to pay as much for each additional unit and this results in a downward sloping demand curve. At a price of Rs. 40 per unit x, individual’s demand for x was 5 units. The 6th unit of commodity x will be worth less than the 5th unit. The individual will be willing to buy the 6th unit only when the price drops below Rs. 40 per unit. Hence, the law of diminishing marginal utility explains why demand curves have a negative slope.” |