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# Economics

## Economics Questions

It is said that, “total utility of a commodity is maximum when its marginal utility is zero” explain the statement with the help of a diagram. Define price elasticity of demand. How can you calculate the price elasticity of demand in a specific point of a straight line demand curve? …

## Example and Explanation of Law of Equi-Marginal Utility

Example and Explanation of Law of Equi-Marginal Utility The doctrine of equi-marginal utility can be explained by taking an example. Suppose a person has Tk. 5 with him whom he wishes to spend on two commodities, tea and cigarettes. The marginal utility derived from both these commodities is as under. …

## Definition and Statement of Law of Equi-Marginal Utility

Definition and Statement of Law of Equi-Marginal Utility The law of equi-marginal utility is simply an extension of law of diminishing marginal utility to two or more than two commodities. In cardinal utility analysis, this law is stated by Lipsey in the following words: ” The household maximizing the utility …

## Practical Importance of Law of diminishing marginal utility

Practical Importance of Law of diminishing marginal utility The law of diminishing marginal utility has great practical importance in economics. The law of demand, the theory of consumer’s surplus, and the equilibrium in the distribution of expenditure are derived from the law of diminishing utility. 1. Basis of the law …

## Limitation/Exception of Law of Diminishing Utility

Limitation/Exception of Law of Diminishing Utility There are some exceptions or limitations of the law of diminishing utility. Case of intoxicants: Consumption of liquor defies the law for a short period. The more a person drinks, the likes it. However, this is tire only initially. A stage comes when a …

## Assumptions of Law of Diminishing Marginal Utility

Assumptions of Law of Diminishing Marginal Utility The law of diminishing marginal utility is true under certain assumptions. These assumptions are as under: i) Rationality: In the cardinal utility analysis, it is assumed that the consumer is rational. He aims at maximization of utility subject to availability of his income. …

## Schedule of Law of Diminishing Marginal Utility

Schedule of Law of Diminishing Marginal Utility Units Total Utility Marginal Utility 1st glass 2nd glass 3rd glass 4th glass 5th glass 6th glass 20 32 40 42 42 39   20 12 8 2 0 -3     From the above table, it is clear that in a given …

## Explanation and example of law of diminishing marginal utility

Explanation and example of law of diminishing marginal utility This law can be explained by taking a very simple example. Suppose a man is very thirsty. He goes to the market and buys one glass of water. The glass of water gives him immense pressure or we say the first …