Q251
According to Marshall, the basis of consumer surplus is
A.
Law of diminishing MU
AnswerB.
Law of Equi-MU
C.
Law of proportions
D.
All of the above
Answer: Option A
Solution
Answer: Option A
Solution:
According to Marshall, the basis of consumer surplus is Law of diminishing MU. As per the law, as we purchase more of a commodity, its marginal utility reduces. Since the price is fixed, for all units of the goods we purchase, we get extra utility. This extra utility is consumer surplus.