Question

The law of diminishing marginal utility is applicable only when

• A. the units consumed are heterogeneous
• B. the commodity units are homogeneous, being consumed continuously and reasonably large in volume and size e.g. cup(s) of milk not a spoon or few drops
• C. the consumer keeps consuming unlimited units normally irrespective of any sense
• D. additional utility goes on increasing with an increase in total utility

Hint:

The Law of Diminishing Marginal Utility assumes rational consumer behavior and standard, homogeneous units of consumption.
Exceptions include hobbies like collecting rare stamps or coins, where utility often increases with each new item.

Answer 1

The Correct Option is B

Step 1: Understanding the Concept:
The Law of Diminishing Marginal Utility states that as an individual consumes more units of a commodity, the utility or satisfaction derived from each additional unit decreases.
For this economic law to hold true, several assumptions regarding the consumption process must be met.

Step 2: Detailed Explanation:
Let us analyze the required assumptions for the law of diminishing marginal utility:
Homogeneity of units: Every unit of the consumed commodity must be identical in quality, taste, and size.
If the second unit is of better quality than the first, the marginal utility might increase instead of decrease.
Continuity of consumption: The units must be consumed in quick succession without long time intervals.
If there is a long break between consumption, the marginal utility of the next unit may increase.
Reasonable size of units: The units of the commodity must be of standard, reasonable size.
If the units are too small (such as drinking water drop-by-drop or milk spoon-by-spoon), each additional unit may increase satisfaction instead of decreasing it.
A standard unit (like a cup of milk) is required for the law to apply correctly.
Therefore, the law applies only when the commodity units are homogeneous, consumed continuously, and are of a standard, reasonable size.

Step 3: Final Answer:
The conditions required for the law to apply are represented by option (B).