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State any two assumptions of law of diminishing marginal utility. |
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Answer» Two assumptions of law of diminishing marginal utility are as follows: (a) Change in other person’s stock: The law of diminishing marginal utility does not hold if there occurs a change in other people’s stock. According to the law, marginal utility diminishes when there is an increase in our stock. But it is pointed out that in some cases the utility changes not because of a change in our stock, but because of a change other people’s stock. (b) Suitable Time: In order to make the law applicable, the commodity should be consumed within a certain time otherwise, the law will not operate. |
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