rises and then falls
both ordinal and cardinal
none of the above
|1. Column A||Column B|
|1) Time utility||a) Transport|
|2) Place utility||b) Blood bank|
|3) Service utility||c) Mobile phone|
|4) Knowledge utility||d) Doctor|
1- d, 2 – b,3 – a, 4 – c
1- b, 2 – a, 3 – d, 4 – c
1 – a, 2 – b, 3 – c, 4 – d
1 – b, 2 – c, 3 – d, 4 – a
a) MU is greater than price
b) MU is equal to price
c) MU is less than price
d) Price is less than one
a and b
a, b, c and d
a, b and c
Sol: – Relative concept
The utility is related to time and place.
It varies from time to time and place to place.
woollen clothes have a greater utility in the winter.
Sol: – Subjective concept
It is a psychological concept. Utility differs from person to person. This is due to differences in taste, preferences, likes, dislikes, nature, habits, profession.
Sol: – Total utility or continuity
Total utility (TU):
Total utility refers to the aggregate of utility derived by the consumer from all units of a commodity consumed. It is an aggregate of utilities from all successive units of a commodity consumed.
All units of commodity are consumed in quick succession without any lapse of time.
Sol: – Point of satiety
After reaching the point of satiety, a rational consumer should stop his consumption since the maximum limit of satisfaction is reached and there is no addition to total utility by any further increase in the stock of a commodity.
Sol: – Utility
The utility is the capacity of a commodity to satisfy human wants. In other words, utility is the want satisfying power of a good.
Pen and notebook have utility to satisfy Lalita’s want.
Thus the concept is utility.
|Units of a commodity||TU units||MU units|
Answer: – The law of diminishing marginal utility states that: “As a consumer consumes more and more units of a commodity at succession, the Marginal Utility derived from the consumption of each additional unit of the commodity falls.” The law of diminishing marginal utility fails to operate in the following situations.
i. Hobbies – Hobbies such as jewellery collection by women, stamp collection, old coins, antiques etc. violate the law.
ii. Misers – In case of misers, MU increases with the increase in the total amount of money available to him, violating the law.
iii. Drunkards – The consumption of products like liquor and cigarettes violates the law. As people tend to consume more of these products, the thirst utility for additional units is greater. This is the reason for the violation.
iv. Power – The law also fails in case of acquiring power. An individual feels more pleasure and derives a higher level of utility, with a greater degree of power.
v. Listening to music – In the initial phase, listening to good music again and again violates this law. However; after a certain limit, listening to the same music becomes boring. As a result, the marginal utility tends to diminish. Thus, it is only in the initial period when listening to good music violates the law of diminishing marginal utility.
vi. Reading – More and more reading gives an individual more pleasure and a higher level of utility. This happens because, with more and more reading, an individual acquires a greater degree of knowledge and higher education.
vii. Money – The law of diminishing marginal utility fails in case of earning money. Due to the greed of earning money, people tend to earn as much money as they can