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 additional satisfaction or utility derived from each additional unit of the good decreases. In other words, the marginal utility of the good decreases as consumption increases.
This is because as a consumer consumes more of a good, their needs and wants are increasingly satisfied, and the importance or value of each additional unit diminishes. Therefore, the marginal utility derived from the good decreases at a decreasing rate.
