Question

State with reason whether you 'agree' or 'disagree' with the following statement.

Homogeneity of commodities is the only assumption of the law of diminishing marginal utility.

Options

• Agree

• Disagree

Answer 1

I do not agree with the given statement.

This is because, Homogeneity of commodities is one of the assumption of the law of diminishing marginal utility and apart from that there are many more assumptions like ,

1. Cardinal Measurement: It is assumed that utility can be measured in cardinal numbers or numerical terms. Such assumption helps to construct (make) the utility schedule to explain the Law of Diminishing U.

2. Continuity in Consumption: All units of the commodity are to be consumed in quick succession. There should not be a gap or interval between consumption of two different.

3. Ceteris Paribus: The Law of DMU assumes that other things are constant. For instance, taste, income, preference, attitudes, habits of the consumer should remain the same. If there is a change in attitude then marginal utility of the commodity may not diminish.

4. Rationality:It is assumed that consumer behaviour is rational. (Not be mad) the consumer is a normal person who wants to obtain maximum satisfaction. The consumer should not be abnormal such as drug addict, drunkard, miser (kanjus), and so on.

5. Reasonable Units: The units of a commodity consumed should be of reasonable size. The units should neither be too big nor too small. The units must be of standard size.