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Question : The Law of Diminishing Marginal Utility will not hold good if the income of the consumer:

Option 1: Increases

Option 2: Decreases

Option 3: Remains constant

Option 4: Either a) or b)


Team Careers360 2nd Jan, 2024
Answer (1)
Team Careers360 24th Jan, 2024

Correct Answer: Either a) or b)


Solution : The correct answer is (d) Either a) or b).

The Law of Diminishing Marginal Utility assumes that the income of the consumer remains constant. When the consumer's income increases, they have the ability to purchase more units of a good, which can affect their marginal utility. If the consumer's income decreases, they may have to reduce their consumption of the good, which can also affect their marginal utility. In both cases, the law may not hold true as the change in income can alter the consumer's preferences and the utility derived from each unit of the good. Therefore, if the income of the consumer changes, either by increasing or decreasing, the Law of Diminishing Marginal Utility may not apply.

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