Q6 of 25 Page 1

Explain the law of diminishing marginal utility, using a suitable diagram or a schedule.

● The utility is the power of a good to satisfy the wants.


● The law of diminishing marginal utility states that as a consumer consumes more and more of a specific good, the additional utility derived from each successive unit goes on diminishing.


This can be explained using the following schedule:



● Initial stages witnessed that with continuous consumption of apples the marginal utility falls but remains positive. The marginal utility falls from 6 to 2.


● After reaching a certain consumption level, the marginal utility will become zero. After consuming 4 apples, the marginal utility at this point will become zero. This is called the saturation point or point of satiety.


● At the consumption of 5th apple, the marginal utility becomes negative to - 2.


More from this chapter

All 25 →
4

If the Marginal Revenue curve is parallel to the X-axis, the price of the

commodity would be ____________ . (Choose the correct alternative)


 5

‘‘Problem of resource allocation would not arise if resources do not have alternative uses.’’ Defend or refute the statement with valid arguments.

OR


Discuss briefly the meaning of positive economics and normative economics, with suitable examples.


 7

Suppose the demand and supply curves of a commodity X, in a perfectly a competitive market, is given as :

Qd = 2200 – 3p, and


Qs = 1800 + 2p


Estimate the values of equilibrium price and equilibrium quantity of the commodity X.


OR


The market for a commodity is in equilibrium. The supply of thecommodity decreases, without any corresponding change in the demand


for the commodity.


Discuss, using a diagram, the impact of the given change in theequilibrium price and equilibrium quantity of the commodity.


 7 A

Note: The following question is for the Visually Impaired Candidates only, in lieu of Q. No. 7 (Alternative) :

The market for a commodity is in equilibrium. The supply of the commodity decreases, without any corresponding change in the demand


for the commodity.


Discuss the impact of the given change in the equilibrium price and the equilibrium quantity of the commodity.