Question : According to the law of diminishing marginal utility, as a consumer consumes more of a good:
Option 1: The total utility derived from the good increases at a decreasing rate.
Option 2: The marginal utility derived from the good increases at a decreasing rate.
Option 3: The total utility derived from the good decreases at a decreasing rate.
Option 4: The marginal utility derived from the good decreases at a decreasing rate.
Correct Answer: The marginal utility derived from the good decreases at a decreasing rate.
Solution : The correct answer is (d) The marginal utility derived from the good decreases at a decreasing rate.
According to the law of diminishing marginal utility, as a consumer consumes more of a good, the marginal utility derived from the good decreases at a decreasing rate.
As a consumer consumes more units of a good, the additional satisfaction or utility obtained from each additional unit decreases. This means that the marginal utility, which is the additional utility gained from consuming one more unit of the good, decreases. However, it's important to note that the total utility can still increase as long as the marginal utility is positive, but it increases at a decreasing rate.
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