The law of diminishing marginal utility helps to explain
A)why people trade.
B)the law of demand.
C)why the production possibilities frontier is typically bowed-out.
D)a and b
E)all of the above

Question

Quizplus · Accepted Answer

The law of diminishing marginal utility explains why people trade (A) as they seek to maximize utility by exchanging goods that provide less additional satisfaction for those that provide more. It also explains the law of demand (B) because as the quantity consumed increases, the additional satisfaction decreases, leading consumers to buy less at higher prices.

The Law of Diminishing Marginal Utility Helps to Explain