Question

the principle of diminishing marginal utility: question 17 options: a) refers to the tendency of marginal utility to decline as the amount of consumption of a good or service increases. b) refers to the tendency of total utility to increase until an individual's budget is no longer constrained. c) assumes all goods are expensive. d) indicates that if a good is inferior, less of it will be purchased when income falls during a period.

Answer 1

The principle of diminishing marginal utility refers to the decrease in additional satisfaction from consuming each subsequent unit of a good or service as consumption increases. Option a) is the correct answer, as it accurately describes this economic concept.

Step-by-step explanation:

The principle of diminishing marginal utility refers to the phenomenon where, as we consume more of a good or service, the utility (or satisfaction) we derive from each additional unit tends to decrease compared to what we obtained from previous units. This stands in contrast to the total utility, which increases as we consume more, but at a declining rate. For instance, consider the example of José and his T-shirt purchases; his first T-shirt brings him a high level of utility, but by the fourth one, the additional utility has decreased, reflecting the law of diminishing marginal utility. This concept is crucial for making decisions on the margin and understanding the opportunity cost of choices within a given opportunity set.

Option a) correctly describes the principle of diminishing marginal utility, which says that marginal utility declines as the quantity of a good consumed increases. Options b), c), and d) do not accurately depict this economic principle. The correct understanding of diminishing marginal utility aids in marginal analysis and making more informed choices considering the opportunity cost and the opportunity set.