An individual's demand curve slopes down because
A) marginal utility falls as price falls.
B) the value of the marginal utility falls as the price falls.
C) of the rule that the marginal utility of the last unit must equal the price.
D) of the law of diminishing marginal utility and the rule of equal marginal utilities per dollar.

Question

Quizplus · Accepted Answer

The law of diminishing marginal utility states that as individuals consume additional units of a good, the marginal utility (additional satisfaction) obtained from each additional unit decreases. This implies that individuals are willing to pay a higher price for the first units of a good because they yield a higher level of satisfaction, while they are willing to pay less for additional units that provide a lower incremental satisfaction. The rule of equal marginal utilities per dollar implies that consumers allocate their budget in a way that maximizes their satisfaction, meaning that they will spend more on goods with a higher marginal utility per dollar and less on goods with a lower marginal utility per dollar. As a result, consumers will demand more units of a good as its price decreases, but at a decreasing rate, leading to a downward sloping demand curve.

An Individual's Demand Curve Slopes Down Because