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Question
______ states that as the consumer will distribute his money income between the goods in such a way that the utility derived from the last rupee spent on each good is equal.
Options
Law of Equi-Marginal Utility
Law of Diminishing Marginal Utility
Both Law of Equi-Marginal Utility and Law of Diminishing Marginal Utility.
Neither Law of Equi-Marginal Utility nor Law of Diminishing Marginal Utility.
Solution
Law of Equi-Marginal Utility states that as the consumer will distribute his money income between the goods in such a way that the utility derived from the last rupee spent on each good is equal.
Explanation:
As more units of a commodity are consumed, the marginal benefit derived from each subsequent unit must decrease. According to the law of equi-marginal utility, the consumer will distribute his money earned among the commodities so that the utility gained from the last rupee spent on each is equal.
