b) the law of diminishing marginal utility

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4 Terms

1
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  • define marginal utility

  • the additional utility gained from the consumption of an additional unit of a good or service

2
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  • define the law of diminishing marginal utility

  • additional units of a good are consumed → the utility gained from the next unit = lower than the utility gained from the previous unit

3
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  • state how to calculate total utility

  • the sum of all marginal utilities

4
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  • explain how the law of diminishing marginal utility explains why demand curves slope downwards

  • a unit of a good is purchased → consumers = less willing to purchase additional units at a high price as their utility decreases → lower prices increase the quantity demanded