Which of the following correctly states the difference between the law of diminishing marginal product and the law of diminishing marginal utility?
Answer & explanation
Correct answer: option 3
The correct answer is Option (3) → The first is about the extra output from more units of an input, other inputs fixed; the second is about the lower utility from each successive unit of a commodity.
The two laws look alike but belong to different sides of the market.
Option (1) The first is about total product falling; the second is about total utility falling. — Incorrect. Both laws are about the marginal amount falling. Total product and total utility can still be rising.
Option (2) The first applies only when all inputs are increased together; the second applies only when income rises. — Incorrect. Diminishing marginal product holds when one input rises and the others stay fixed. Raising all inputs together is returns to scale. The law of diminishing marginal utility has nothing to do with income rising.
Option (3) The first is about the extra output from more units of an input, other inputs fixed; the second is about the lower utility from each successive unit of a commodity. — Correct. The first is about a producer adding more of one input; the second is about a consumer taking more units of a good.
Option (4) The first is about the lower utility from each successive unit of a commodity; the second is about the extra output from more units of an input. — Incorrect. This puts the two meanings the other way round.
This question uses Production and Costs and Theory of Consumer Behaviour together.
NCERT (2026-27), Introductory Microeconomics, Glossary: “Law of diminishing marginal product – If we keep increasing the employment of an input with other inputs fixed then eventually a point will be reached after which the marginal product of that input will start falling.” Introductory Microeconomics - Chapter 2, Theory of Consumer Behaviour: “Derivation of Demand Curve in the Case of a Single Commodity (Law of Diminishing Marginal Utility) … 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.” |