The law of diminishing marginal utility states that as an in

\"The law of diminishing marginal utility states that as an individual increases consumption of a given product within a set period of time, the utility gained from consumption eventually declines” Examine whether the statement above is TRUE or FALSE. Explain your response.

\"Lean\'s deluxe garment bag sales increased from 4,800 units to 6,000 units in response to price drop from $30/unit to $20/unit.” Calculate arc price elasticity of this product using mid-point formula.

Solution

The law of diminishing marginal utility is a law of economics stating that as a person increases consumption of a product, while keeping consumption of other products constant, there is a decline in the marginal utility that person derives from consuming each additional unit of that product. according to this above statement is false, as marginal utility declines

arc elasticity = q2 - q1/ (q1 + q2)/2 divided by p2 - p1/(p1 + p2)/2

q2 = 6000, q1 = 4800, p2 = 20, p1 = 30

elasticity = 1200/5400 divided by -10/25

= - 0.556