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.
