Customers are usually more willing to pay more for the first unit of a good they purchase than for the second, third, or subsequent units. This implies that
A)typical consumers are irrational.
B)firms are using non-linear price discrimination.
C)firms are unable to determine their customers' reservation prices.
D)typical consumers have a downward-sloping demand curve.

Question

Quizplus · Accepted Answer

This phenomenon is a result of the downward-sloping demand curve, which means that as customers purchase more of a good, the marginal utility they receive from each additional unit decreases, and thus they are willing to pay less. The concept is known as the law of diminishing marginal utility.

Customers Are Usually More Willing to Pay More for the First