7. (a) State the Law of Diminishing Marginal Utility:
This law states that as a consumer consumes additional units of a good the marginal utility/extra satisfaction derived from each additional unit consumed will eventually decline - Leaving Cert Economics - Question 7 - 2009
Question 7
7. (a) State the Law of Diminishing Marginal Utility:
This law states that as a consumer consumes additional units of a good the marginal utility/extra satisfaction... show full transcript
Worked Solution & Example Answer:7. (a) State the Law of Diminishing Marginal Utility:
This law states that as a consumer consumes additional units of a good the marginal utility/extra satisfaction derived from each additional unit consumed will eventually decline - Leaving Cert Economics - Question 7 - 2009
Step 1
Marginal Utility in units for 2nd Unit
96%
114 rated
Only available for registered users.
Sign up now to view full answer, or log in if you already have an account!
Answer
To find the Marginal Utility for the 2nd unit, we calculate the difference in Total Utility between the 2nd and 1st unit:
Therefore, the Marginal Utility for the 6th unit is 5.
Step 6
Point where Diminishing Utility sets in
97%
121 rated
Only available for registered users.
Sign up now to view full answer, or log in if you already have an account!
Answer
Diminishing utility sets in after the consumption of the 2nd unit, when the Marginal Utility from consuming the 3rd unit decreases to 20, down from 35 for the 2nd unit.
Join the Leaving Cert students using SimpleStudy...