The Law of Diminishing Marginal Utility - SS2 Economics Past Questions and Answers - page 1
What does the law of diminishing marginal utility state?
As a consumer consumes more units of a good or service, the additional satisfaction or happiness they derive from consuming each additional unit increases.
As a consumer consumes more units of a good or service, the additional satisfaction or happiness they derive from consuming each additional unit remains constant.
As a consumer consumes more units of a good or service, the additional satisfaction or happiness they derive from consuming each additional unit diminishes.
What is an example of the law of diminishing marginal utility?
A person buying a new car.
A person buying a new house.
A person eating pizza.
(If a person is hungry and eats a slice of pizza, they will derive a certain level of satisfaction from that first slice. However, if they continue to eat more slices of pizza, the level of satisfaction they get from each additional slice will diminish until they eventually reach a point where they feel full and derive no additional satisfaction from consuming more pizza)
What is the relationship between the level of satisfaction and the number of units consumed according to the law of diminishing marginal utility?
The level of satisfaction increases as the number of units consumed increases.
The level of satisfaction remains the same regardless of the number of units consumed.
The level of satisfaction decreases as the number of units consumed increases.
Why is the law of diminishing marginal utility important in economics?
The law of diminishing marginal utility is important in economics because it explains why consumers tend to demand less of a good or service as its price increases, and why producers tend to supply more of a good or service as its price increases.