State the following statements are True or False: 4. The law of diminishing marginal utility explains economic behaviour of a rational consumer.

State the following statements are True or False:
4. The law of diminishing marginal utility explains economic behaviour of a rational consumer.
ANSWER:
4) The law of diminishing marginal utility explains economic behaviour of a rational consumer.
-True

Explanation:

The law of diminishing marginal utility states that: “As a consumer consumes more and more units of a commodity in succession, the marginal utility derived from the consumption of each additional unit of the commodity falls.” Such behaviour is a rational behaviour. As the consumer has more of a commodity, the intensity of want for additional units goes on decreasing, i.e. utility decreases. No rational consumer would want additional units of the commodity when the intensity of want is decreasing.

No comments: