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Income Method

Marginal Util...

Question

Marginal Utility of money remains constant.

A

True

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B

False

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Solution

The correct option is B False
The marginal utility of money changes depending on the value of the money. That is, the value of the money changes depending on the inflation in the economy. A high inflation would mean a low value of money and low marginal utility and vice versa.

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Similar questions

Q. In marginal utility theory, marginal utility of money is ____________.

Q. An assumption of the constant marginal utility of money means the importance of money to the consumer is _________.

Q. Suppose, price of commodity-Y (

P_{Y}

10

per unit. Also, assume that marginal utility of money

(M U_{m})

8

(and constant). Using the following marginal utility schedule of the consumer, find out equilibrium level of consumption and total expenditure on commodity-Y

Units Consumed	$1$	$2$	$3$	$4$	$5$	$6$
Marginal Utility	$170$	$130$	$110$	$80$	$30$	$0$

Q. If the consumer consumes only one commodity 'X', he will be in equilibrium when _________.
[Here,

M U_{X} =

Marginal utility of the Good

- X

(in terms of money);

P_{X} =

- X

Q. Distinguish between :
Total Utility and Marginal Utility Diminishing Marginal Utility.

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