What happens if diminishing marginal utility holds and a person consumes less of a good?
If diminishing marginal utility holds and a person consumes less of a goodthen which of the following will happen; all else being equal? ► Marginal utility will decline. ► The price of the good will rise.
Who originally gave the law of diminishing marginal utility?
The law of diminishing marginal utility, as developed by Carl Menger (1840–1921), is axiomatic in nature; that is, it is irrefutably true. In mainstream economics, however, this fundamental economic law is typically interpreted as resting on psychology, namely the law of satiation of wants.
What are the exceptions to the law of diminishing marginal utility?
Drunkards/Drug addicts: It is believed that every dose of drug or liquor increases utility to the consumer. But in the case of drunkard or drug addict, there is no rational behaviour is assumed. Miser: -A miser’s greed increases with the increases in the stock of money.
What is law of equi marginal utility?
The law states that a consumer should spend his limited income on different commodities in such a way that the last rupee spent on each commodity yield him equal marginal utility in order to get maximum satisfaction. …
What is marginal utility of money?
The amount by which an individual’s utility would be increased if given a small quantity of additional money, per unit of the increase. Additional money can increase utility in two ways. The marginal utility of money is then derived through the additional consumption it finances.
Does law of diminishing marginal utility apply to money?
As a man grows rich, he becomes careless in spending money. He wastes it on useless luxuries which do him no good. It only means that a person does not attach the same importance to additional wealth, or that its marginal utility decreases. Hence the law of diminishing marginal utility undoubtedly applies to money.
When marginal utility of consuming a good is zero total utility is?
If marginal utility is zero, that means you are at your maximum utility–consuming more of a product will not increase the utility. When a good becomes less expensive, it yields more satisfaction per dollar, so consumers buy more of it and less of other goods.