Question : What is the First Law of Gossen?
Option 1: Law of Equi-marginal utility
Option 2: Law of Diminishing marginal utility
Option 3: Law of supply
Option 4: Law of demand
Correct Answer: Law of Diminishing marginal utility
Solution : The correct answer is (b) Law of Diminishing marginal utility.
The Law of Diminishing Marginal Utility, also known as the First Law of Gossen, states that as a consumer consumes more units of a specific good, the additional utility or satisfaction derived from each additional unit decreases. In other words, as consumption increases, the marginal utility decreases. This law helps explain why consumers are willing to pay less for additional units of a good and why they seek to allocate their resources in a way that maximizes their overall satisfaction.
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