Marginal utility analysis predicts a downward-sloping demand curve for good X because
A)as PX falls,the ratio MUX/PX becomes smaller,causing the consumer to purchase more of good X.
B)as PX rises,the consumer increases purchases of X such that MUX/PX is equal to MU/P for all other products.
C)utility-maximizing consumers equate marginal utility received for each product consumed.
D)all demand curves are downward sloping,regardless of the behaviour of consumers.
E)as PX falls,the consumer increases purchases of X until MUX/PX is equal to MU/P for all other products.

Question

Quizplus · Accepted Answer

Marginal utility analysis suggests that as the price of good X (PX) falls, consumers will buy more of it until the marginal utility per dollar spent on X (MUX/PX) equals the marginal utility per dollar spent on all other products (MU/P). This behavior explains why the demand curve for good X slopes downward.

Marginal Utility Analysis Predicts a Downward-Sloping Demand Curve for Good