Maria is considering her lunch purchase.Unfortunately,the deli doesn't have a very extensive menu: apples at $0.50 each,bagels at $1 each,and cappuccino at $2 each.Her utility from each is shown in the table below.

-Why does the demand curve slope downward?
A)Since the marginal utility increases with increased consumption,people will be eager to buy more at lower prices.
B)Since the marginal utility decreases with increased consumption,the price must fall in order to induce people to buy more.
C)Since total utility increases with increased consumption,a lower price is necessary to encourage increased production.
D)Lower prices mean a lower consumer surplus which will encourage increased consumption.

Question

Maria is considering her lunch purchase.Unfortunately,the deli doesn't have a very extensive menu: apples at $0.50 each,bagels at $1 each,and cappuccino at $2 each.Her utility from each is shown in the table below.
 
-Why does the demand curve slope downward?
A)Since the marginal utility increases with increased consumption,people will be eager to buy more at lower prices. 
B)Since the marginal utility decreases with increased consumption,the price must fall in order to induce people to buy more. 
C)Since total utility increases with increased consumption,a lower price is necessary to encourage increased production. 
D)Lower prices mean a lower consumer surplus which will encourage increased consumption.

Quizplus · Accepted Answer

The demand curve slopes downward because, according to the law of diminishing marginal utility, as consumers consume more of a good, the additional satisfaction (marginal utility) they get from consuming an additional unit decreases. Therefore, to encourage more consumption, the price must decrease to make additional units of the good more attractive to consumers. This principle explains why consumers are willing to buy more of a product only if its price falls.

Maria Is Considering Her Lunch Purchase