Which of the following examples best describes the Law of Diminishing Marginal B
ID: 1216443 • Letter: W
Question
Which of the following examples best describes the Law of Diminishing Marginal Benefit? If the weather gets cold, the demand for ice cream will fall. With each additional pen Jill buys, her willingness to pay for another pen decreases. Each additional unit of ice cream that John consumes gives him more and more satisfaction. If a seller of notebooks in a perfectly competitive market charges above the market price, his profit decreases. Which of the following factors is likely to lead to an increase in the quantity demanded of pens? A fall in the price of paper A fall in the price of pens A rise in the incomes of all consumers A fall in the incomes of all consumers Assume that the economy is in a recession end consumers are expecting a fall in their income levels. This will cause a(n). increase in the total quantity demanded of all goods right shift in the market demand for all goods. left shift in the market demand for all goods. decrease in the total quantity demanded of all goods.Explanation / Answer
Answer for Q.No. 15:
Law of diminishing marginal benefit: As you go on consuming more and more units of any product or sevice, marginal utility from each additional unit goes on decreasing.
So applying this rule, option 1 is not this law, as there is no consumption of ice creams. Second option, is a perfect example of Law of diminishing marginal utility. As Jill buys more and more units of the pen, her willingness to pay for additional pen decreases or other way around, his marginal utility from each additional pen goes on decreasing with each additional pen.
Q.No.16: If we talk in terms of Law of demand, considering all other factors as constant, the quantity demanded of a good is inversly related to the price of that good. Thus assuming all other things constant, answer should be option 2, i.e. Quantity Demanded of Pens should increase by a fall in price of pens. However, if you could ignore this assumption this can be affected by all first 3 options.
Q.No. 17: If the economy is in recession, and consumers are expecting that tomorrow there will be a fall in their income levels. Just think of you in place of them, what would you do? Simply you will try to save today so that you could buy tomorrow also. Thus there will be a left shift in the market demand for all goods.
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