An increase in the price of a good leads to:
A) an increase in the marginal utility per dollar of that good, and thus an increase in the quantity purchased.
B) an increase in the marginal utility per dollar of that good, and a decrease in the quantity purchased.
C) a decrease in the marginal utility per dollar of that good, and an increase in the quantity purchased.
D) a decrease in the marginal utility per dollar of that good, and thus a decrease in the quantity purchased.

Question

Quizplus · Accepted Answer

According to the law of demand, an increase in the price of a good will lead to a decrease in the quantity demanded. Marginal utility per dollar refers to the additional satisfaction gained from spending an additional dollar on a good. As the price of a good increases, the marginal utility per dollar will decrease, as consumers will be less willing to spend more money on the same level of satisfaction. Therefore, the correct answer is D, a decrease in the marginal utility per dollar of that good, and thus a decrease in the quantity purchased.

An Increase in the Price of a Good Leads To