Question : The law of diminishing marginal utility states that:
Option 1: Marginal utility increases as consumption increases
Option 2: Total utility decreases as consumption increases
Option 3: Marginal utility decreases as consumption increases
Option 4: Total utility remains constant as consumption increases
Correct Answer: Marginal utility decreases as consumption increases
Solution : The correct answer is (c) Marginal utility decreases as consumption increases.
According to this law, as a consumer increases the consumption of a particular good or service while keeping the consumption of other goods constant, the additional utility or satisfaction derived from each additional unit of the good will diminish. In other words, the marginal utility of a good tends to decrease as more of it is consumed. This implies that each additional unit of a good provides less additional satisfaction than the previous unit, leading to a downward-sloping marginal utility curve.
