Why does the law of diminishing marginal utility encourage people to spread thei

Question

Why does the law of diminishing marginal utility encourage people to spread their spending across many different types of goods? 2.Under what conditions will an increase in the price of a product lead to a reduction in total spending for that product? 3.Why do economists pay little attention to the algebraic sign of the elasticity of demand for a good with respect to its own price, yet they pay careful attention to the algebraic sign of the elasticity of demand for a good with respect to another good's

Explanation / Answer

1. Because According to Law of marginal utility,marginal utility of consuming a good finally after a point starts decreasing with increase in consumption, thus if consumer spread their spending across different goods, they can have more ultility , so, in this way Law of iminishing encourages to spread their spending.

2. under the following conditions

3. Because in case of cross price elasticity, the sign gives us information about which type of goods are they and in case of own price elasticity, it is always negitive in the case of normal goods. But in the case cross price elasticity if it is positive then two good are substitutes and if the negitive then the two goods are complementary.

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