Higher prices
A) lower the marginal utility per dollar spent and cause consumers to buy less of a good.
B) increase the marginal utility per dollar spent and cause consumers to buy less of a good.
C) do not change the marginal utility per dollar.
D) lower the marginal utility per dollar spent and cause consumers to buy more of a good.
E) increase the marginal utility per dollar spent and cause consumers to buy more of a good.

Question

Quizplus · Accepted Answer

According to the law of diminishing marginal utility, as a consumer consumes more of a good, the marginal utility that they derive from each additional unit of that good decreases. Therefore, as the price of a good increases, the marginal utility per dollar spent decreases, making consumers less willing to buy the good. This is reflected in choice A, where higher prices lower the marginal utility per dollar spent and cause consumers to buy less of a good.

Higher Prices