A Level Economics AQA Practice Exam

The Law of Diminishing Marginal Utility suggests that:

1. Utility will always increase with consumption

2. Additional units will provide less satisfaction over time

3. All units of consumption are equally satisfying

4. Marginal utility is unaffected by the number of units consumed

The correct answer is: Additional units will provide less satisfaction over time

The Law of Diminishing Marginal Utility states that as a person consumes additional units of a good or service, the satisfaction or utility gained from each additional unit tends to decrease. This concept is essential in understanding consumer behavior and decision-making. As individuals satisfy their needs, the first few units consumed typically provide a higher level of satisfaction. However, as consumption increases, the additional satisfaction derived from consuming each subsequent unit decreases. For example, consider eating slices of pizza; the first slice may provide significant pleasure, but by the fifth or sixth slice, the enjoyment diminishes, and the person might even feel uncomfortable. This principle helps explain various phenomena in economics, such as consumer choice, demand curves, and the allocation of resources. The understanding of diminishing marginal utility underpins many theories regarding pricing, consumption patterns, and overall utility maximization, making it a fundamental concept in economic analysis. The other options do not align with this principle. Utility increasing with consumption would contradict the idea of diminishing satisfaction. Saying that all units are equally satisfying ignores the changed satisfaction levels as consumption rises. Lastly, marginal utility being unaffected by the number of units consumed overlooks the essence of the diminishing marginal utility concept itself, which specifically involves changes in satisfaction as consumption increases.