If the price of a product rises, consumers buy less of the good because the:
A) MU/P of the good falls below the MU/P of other goods.
B) MU/P of the good rises above the MU/P of other goods.
C) marginal utility of the good diminishes.
D) total utility of the good diminishes.
E) marginal utility of the good rises.

Question

Quizplus · Accepted Answer

When the price of a product rises, the MU/P (marginal utility per dollar) of that good falls below the MU/P of other goods, making consumers less likely to purchase it. This is because consumers will seek to allocate their budget towards goods that give them the most satisfaction for each dollar spent, and a higher price reduces the relative satisfaction obtained from the good.

If the Price of a Product Rises, Consumers Buy Less