For the working of 'Law of Diminishing Marginal Utility' it is necessary that:

Question

Accepted Answer

The correct option is 4:
The Law of Diminishing Marginal Utility (LDMU) states that as a consumer consumes more and more units of a specific commodity, the utility derived from each successive unit decreases. Marginal Utility (MU) is the additional satisfaction gained from consuming one more unit. Total Utility (TU) is the sum of the Marginal Utilities derived from all units consumed. If Marginal Utility is positive but decreasing, it means that while the consumer is still gaining satisfaction (Total Utility is increasing), the rate at which Total Utility is increasing is slowing down. Therefore, for the LDMU to be operating, Total Utility must continue to grow, but at a decreasing rate. This relationship is a fundamental concept in consumer behavior theory.

The incorrect option is 1:
If Total utility keeps on decreasing, it implies that the Marginal Utility of the additional unit consumed is negative. This occurs after the point of satiety (where MU is zero), which is the point where LDMU finishes its operation and TU starts to fall.

The incorrect option is 2:
Keeping total utility constant would imply that the Marginal Utility (MU) from every additional unit consumed is zero. This situation is the precise point of maximum satisfaction, not the process of diminishing marginal utility.

The incorrect option is 3:
If Total utility grows at an increasing rate, it means that the Marginal Utility (MU) is increasing with each successive unit consumed (known as the Law of Increasing Marginal Utility). This contradicts the Law of Diminishing Marginal Utility, which requires MU to be decreasing.