SSC BOARD PAPERS IMPORTANT TOPICS COVERED FOR BOARD EXAM 2024

### Law of diminishing marginal utility depends up on various assumptions.

Ans. Yes, I do agree with the above statement because following are the assumptions of the law of diminishing marginal utility.

Assumptions of the law
The validity of the law depends upon the following assumptions­
1.       Homogeneity
2.       Single use
3.       Cardinal measurement
4.       Rationality
5.       Continuity
6.       Reasonability
7.       Constancy
8.       Divisibility
9.       Constant marginal utility of money income

1.       Homogeneity - The law assumes that units of a commodity consumed by a consumer are uniform. They are identical or same in case of size, colour, shape, taste, quality, etc.

2.       Single use - Utility is multi-purpose for some goods which satisfy variety of wants. Here, it is assumed that a commodity is used to satisfy only a single want to experience the law.

3.       Cardinal measurement - Utility can be measured in numbers. So that, it is possible to know and compare utility derived from each unit of a commodity. It helps to understand the law.

4.       Rationality - A consumer is assumed to be a rational person and his behaviour is normal and therefore, he tries to maximise his satisfaction.

5.       Continuity - The units of a commodity are consumed in quick succession, one after another. MU will not diminish, if there is time interval.

6.       Reasonability - The units of commodity consumed, should be of a standard or normal size. They should neither be too big nor too small. e.g. a cup of tea, a glass of water, etc.

7.       Constancy - Income, taste, habits, liking, etc., of a consumer and price of a commodity remain constant throughout the period of consumption. It also assumes that MU of each unit of money remains constant.

8.       Condition of divisibility - The law assumes that the commodity consumed by the consumer is divisible so that it can be acquired in small quantities for quick consumption.

9.       Constant marginal utility of money income When the consumer spends his income, the utility of the remaining money income is the same as his total income.

The law holds true only, if the above given assumptions are fulfilled.